SUPERVALU TO CLOSE 30 STORES IN THREE STATES

ELLIOT ZWIEBACH

MINNEAPOLIS -- Supervalu here said last week it will close 30 underperforming retail stores in Pennsylvania, New Jersey and Indiana as part of its ongoing strategy to focus retail operations and capital spending in markets with high growth potential.

Although the company anticipates additional store closings during the year, it does not plan to exit any additional markets, a spokeswoman told SN last week. She said Supervalu has already closed one or two stores this year, "and we will close additional stores in a scattering of markets throughout the year," she added. Supervalu said last week it will close its 19-store Laneco group in Pennsylvania and New Jersey and 11 Cub Food Stores in central Indiana within 30 to 60 days, pending the outcome of discussions it is having with a number of potential buyers, including food and nonfood retailers.

According to Jeff Noddle, president, chief operating officer and, as of June 27, chief executive officer, "By concentrating on markets where we have the best opportunity to succeed and by improving overall returns, we are building a stronger retail organization that will generate long-term growth and improved shareholder value."

Retail operations remain a core element of Supervalu's new growth platform, Noddle said, with plans to increase retail square footage this year by approximately 5% -- primarily through the opening of 100 to 120 new units of Save-A-Lot, its limited assortment chain, plus 10 to 15 price superstores in "key retail markets."

The spokeswoman told SN last week Supervalu has already opened two new Cubs in the Chicago area, with several more planned for the Twin Cities and "a handful of other markets" later this year.

According to one securities analyst, who asked not to be named, the pending shutdown of the Laneco operation comes as no surprise "because that's a store group Supervalu inherited when it acquired Wetterau, and it's a chain that never stood for anything, unlike most of Supervalu's other retail stores."

The analyst said the decision to close the Indiana Cub stores stems from a unique situation resulting from the intense competition between supercenters operated by Wal-Mart Stores, Bentonville, Ark., and Meijer, Grand Rapids, Mich., "who have been beating each other up in that area, more so than anyplace else, and everyone else is just getting decimated.

"Two years ago Supervalu would probably have been very happy with those Cub stores, so the negative situation has not existed for too long, which makes it kind of scary to contemplate that a market area in which a chain is well-positioned could change so quickly -- though most other markets in which Supervalu operates are unionized and therefore more protected from a large supercenter influx."

With union contracts at all 19 Lanecos and 10 of the 11 Cubs, both chains suffered from trying to compete on a price basis with nonunion supercenters, Gary Giblen, senior vice president and director of research for C L King Associates, New York, told SN. "The Lanecos didn't have much price credibility and the Cubs were operating from too far back," he said.

Speaking with securities analysts late last year, Noddle said Supervalu planned to use the Cub format as a primary vehicle for recapturing sales in several "hot spots," which included Indiana, Ohio and parts of Illinois outside Chicago following the large number of supercenter openings in those areas. "Because Cub is price-oriented, we've always felt it is well-positioned against supercenters," Noddle said at the time. "But we may not have done enough remodelings of units ... in the past and perhaps we've become more vulnerable."

Supervalu said last week it is "substantially increasing" remodeling activity across its retail network, including plans to upgrade Cub stores in Illinois and Wisconsin. The move "leverages our position within key markets and should help generate quick and profitable growth," Noddle said.

The 30 stores that will close include 12 Laneco-banner stores (nine in Pennsylvania, three in New Jersey), four Foodlane stores (three in Pennsylvania, one in New Jersy), three Laneco-operated Shop 'n Save stores (all in Pennsylvania) and 11 Cubs in Indiana, including seven in Indianapolis.

Of the Lanecos, nine were supercenters and seven were conventional units.