SUPERVALU PLANS UP TO 200 COMBOS

Elliot Zwiebach

NEW YORK -- Supervalu, Minneapolis, plans to open 75 to 100 combination stores, joining its Save-A-Lot limited assortment format with Deal$-Nothing Over a Dollar, the general merchandise chain it acquired last year, said Chairman and Chief Executive Officer Jeff Noddle in a presentation to investors at a Merrill Lynch Retailers Conference here.

Supervalu also plans to retrofit 100 existing Save-A-Lots to expand them to combination stores this year, Noddle said.

The distributor opened 35 combination stores last year and retrofitted 35 others, while another 1,000 of the company's 1,150 Save-A-Lots have boosted their product mix to include 200 general merchandise items during the past year, he noted.

Noddle said Supervalu plans to open a general merchandise warehouse in Ohio this year, and it also plans to open three replacement food distribution centers for its Save-A-Lot network in Ohio, Michigan and New York "that will continue to improve their distribution efficiency."

Supervalu also licenses the Save-A-Lot format. Noddle noted the first licensed combination store opened early in February in Indiana.

With Save-A-Lot operating in 36 states, Supervalu contemplates a national rollout over the next few years. "Save-A-Lot is Supervalu's national growth opportunity," Noodle said. "Longer term, we intend to leverage our current industry position and take this format coast to coast and border to border."

Asked whether Supervalu is adding customers formerly served by Dallas-based Fleming, Noddle said it is adding some business among customers Fleming has lost, "and we expect to affiliate more of these kinds of customers."

In response to another question, Noddle said Supervalu would consider buying parts of Fleming if they come up for sale. "We take a look at anything that comes available in the industry, both at retail and distribution," he said, "so if that should occur, of course we would take a look and analyze their asset base."

Other points mentioned by Noddle in his talk included the following:

Supervalu plans to convert its Metro banner in the Baltimore area to the Shoppers Food Warehouse banner this year, as previously disclosed. He said the company consolidated the back offices of the two chains last year "to set the stage for this marketing conversion."

Food logistics and distribution represent 50% of Supervalu's revenues and 30% of operating profits, "and we have some strong headwinds that are impacting our profitability in the short run for distribution," Noddle said, including initiatives in the areas of labor productivity, inventory management, transportation efficiencies, technology-driven savings and service-level improvements.