Supervalu gave Wall Street some positive news last week when the company reported fourth-quarter results and a better-than-expected outlook for the year.
After the stock had plunged about 35% in 2012 to reach new all-time lows, the diversified, Minneapolis-based wholesaler and retailer regained some ground when it said net income (excluding a goodwill write-down) was only down about 15% compared with last year’s fourth quarter, and identical-store sales were projected to be negative only 1% or 2% for the current year.
“The latest results offer validation that the business is not fundamentally broken,” said Ajay Jain, an analyst with Cantor Fitzgerald, as reported by SN’s Elliot Zwiebach.
Supervalu has been working to improve its price perception, which some analysts believe will help stanch market-share erosion.
So, with Wall Street starting to feel better about the company, and with customers coming around, that leaves one major constituency that needs to get behind Supervalu’s efforts at recovery — its employees. Online posts from workers and reports from close observers of the situation indicate frustration among employees about the company’s leadership and strategic direction. Supervalu has struggled to transform itself from a focus on wholesaling to operating a diverse portfolio of retail banners, while under the gloomy shadow of a weak economy. Strategies have shifted under three different CEOs in the last six years, from Jeff Noddle’s strong focus on wholesaling to Larry Johnston’s Six Sigma “black belts” to Craig Herkert’s focus on detail.
Compounding Supervalu’s challenges is the elimination of 800 positions announced earlier this year. While the staff reductions might be in the best interests of the company, in the near term they only seem to deepen anxiety among workers. Supervalu says the cuts will “strengthen and accelerate Supervalu’s business turnaround,” but what employees hear is, “OMG! They fired Harriet in accounting! She was so nice!”
“If you lose the faith of your people, a favorable earnings report or a favorable comment from an analyst can only mask that for so long,” said one observer.
Supermarket retailing, it is often said, is a “penny profit” industry. But it’s also a people industry, and the two concepts work together.
If Supervalu’s people are on board, then the pennies will start rolling in faster, and once the pennies are rolling in, it will become much easier to keep the people on board.