Sales Takes Over at Supervalu

MINNEAPOLIS — Wayne C. Sales, who took the wheel at reeling Supervalu last week, said he would race to prop up the company that he’s also trying to sell.

Sales, Supervalu’s chairman, was named president and chief executive officer last Monday when Craig Herkert was fired. Sales said he would also continue to oversee a review of strategic alternatives that could result in the sale of all or part of the company. Supervalu undertook that review last month acknowledging that declines in sales, earnings and ultimately, share price, had reached crisis levels that led last week to Herkert’s departure.

Sales (right) said he would accelerate Herkert’s plan to slash costs and generate profitable sales at Supervalu’s supermarkets, while growing its Save-A-Lot discount division and building upon its strength with independent customers. He’ll do this while also exploring options to sell parts of the company. Financial analysts continued to speculate last week that Save-A-Lot would likely generate the most interest, but quite a bit of uncertainty remains.

“With all that’s been going on, Supervalu really needs a steady hand to say, ‘Here’s what we’re going to do.’ And the things [Sales] said make sense,” Neil Stern, senior partner at McMillanDoolittle, Chicago, told SN last week. “But what’s underlying all of this are the strategic options. The question remains, what will happen? I just don’t know. You’re simultaneously trying to right the ship and you’re also looking at strategic options, and it’s hard to do both.”

In a memo distributed to Supervalu employees last week, Sales was forthright about Supervalu’s struggles, acknowledging the company was suffering not only sales financial pressures, but from a lack of confidence inside and outside of Minneapolis. He also sought to provoke employees to “prove the naysayers wrong.”

“As we go forward, time is our biggest enemy and we are accountable for the keys to our success,” Sales said in the memo. “Many of our customers and investors have lost confidence and patience with Supervalu; I know some of you may have as well. I am excited to be part of the team, and you have my personal commitment to do everything I can to ensure our future.”

Read more: Supervalu Cuts IT Staff

Sales, 62, joined Supervalu’s board in 2006 and has served as its non-executive chairman since 2010. He said he saw “a number of similarities” between Supervalu and Canadian Tire, the Toronto-based general merchandise and gasoline retailer for which Sales served as president and CEO from 2000 to 2006. At Canadian Tire, Sales led a companywide strategic plan for its various divisions and made a key acquisition of Mark’s Work Wearhouse, helping the retailer recover sales and withstand the entry of Wal-Mart and Home Depot to Canada.

“We were faced with high prices, a high cost structure and no defined point of differentiation,” Sales said of his time with Canadian Tire. “But guess what? By all accounts, we were successful.”

A financial analyst who followed Canadian Tire during Sales’ reign described Sales as a competent and pragmatic leader who did a good job restoring the link between the company and its shoppers.

“I wouldn’t describe him as a turnaround expert. But I’d certainly position him as a strong, competent CEO who has an orientation toward merchandising and marketing as a driver to the business, and so if those skill sets match up with Supervalu’s weaknesses, then it’s a good fit,” said the analyst, who asked not to be identified. “He’s pragmatic, and focused, and can address key issues between customer and retailer.”

SN blog: Supervalu Saga as Cautionary Tale on Strategies

The analyst cautioned, however, that the economic environment and competition appears to be more difficult for Supervalu today than it was for Canadian Tire a decade ago. Analysts following Supervalu last week also pointed to the difficult economic environment as a major hurdle to success, with some expressing doubt that revitalizing Supervalu was even possible.

“We welcome a change at the CEO level, but believe challenges may prove to be insurmountable at this stage for even the most exceptional food retail executive given Supervalu’s market share losses, lack of brand equity, and lack of resonance with the customer,” Karen Short, an analyst for BMO Capital, said in a research note. Short also expressed skepticism that Sales would enact heavy price investments in the near-term while still reviewing strategic options.

“While we believe Mr. Sales will focus on differentiating Supervalu, a strategy he employed at Canadian Tire — we believe Supervalu has become so irrelevant with the consumer that recapturing permanent share will be impossible,” she said.