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Supervalu Eyes Improvements

After posting a 6.8% drop in fourth-quarter comparable-store sales last week and declining traffic volumes, Supervalu here projected that sales will recover in the second half of the fiscal year as its new executive team implements new strategies. This is a long-term process for us, and there is no one-quarter fix, said Craig Herkert, who took over as president and chief executive officer

MINNEAPOLIS — After posting a 6.8% drop in fourth-quarter comparable-store sales last week and declining traffic volumes, Supervalu here projected that sales will recover in the second half of the fiscal year as its new executive team implements new strategies.

“This is a long-term process for us, and there is no one-quarter fix,” said Craig Herkert, who took over as president and chief executive officer nearly a year ago.

The company said its comp-store decline for the quarter included a 3% decrease in customer traffic and a 3.8% decline in average basket size, which it attributed to trading down, deflation and fewer items per order. Deflation ran about negative 80 basis points — the third quarterly decline in a row, which the company attributed both to cost declines and its own pricing initiatives.

Although he said negative sales trends will likely continue through the current quarter and the next, Herkert said he sees positive trends evolving in the second half of Supervalu's current fiscal year. The company projected that full-year comp-store sales would be down about 2%, vs. a 5.1% decline in the recently ended fiscal year.

Among the initiatives Herkert outlined in the earnings call was an increasing emphasis on private label. Earlier this month the company “embedded” members of its private-label group within its category teams as part of an overall shift toward giving the items more prominence in Supervalu's merchandising efforts. Herkert said the company's goal is to grow store brands to 20% of dollar volume this year, up from 18%.

In addition, he said the company expects to gain more traction from centralizing merchandising in Minneapolis, noting that Supervalu is planning “multiple national sales events” with vendors across its 4,300-store network later in this quarter.

Supervalu is also continuing its SKU rationalization effort, and has so far “optimized” 10 major Center Store categories, removing on average 20% of items in each. In addition, the company eliminated 26 general-merchandise categories, including fragrances, automotive accessories and some electronics.

The SKU cuts are part of a wide-ranging initiative called “Simplify Her Experience,” or SHE, that seeks to make shopping the stores “more customer-friendly.” Other aspects of SHE include upgraded displays, improved adjacencies and clearer signage. It is rolling out SHE to about 300 stores this year as part of a $700 million cap-ex plan.

In the fourth quarter, which ended Feb. 27, Supervalu reported net income of $97 million compared with a loss of $201 million in the year-ago fourth quarter, which included $498 million in pretax goodwill and impairment charges. Revenues for the most recent quarter were down about 15%, to $9.2 billion, reflecting the comp-sales decline, store closures and an additional week in the year-ago period.

TAGS: Supervalu