Supervalu Looks to Double Save-A-Lot

MINNEAPOLIS-Determined after a comprehensive review to become “America’s neighborhood grocer,” Supervalu will now use and expand its brands in an integrated–rather than geography-specific way–to enhance its growth, executives said in the company’s second quarter conference call. One result will be the doubling of Save-A-Lot stores over the next five years.

Brands that may not have appeared in a given market may thus make debuts if their niche is appropriate, said Craig Herkert, CEO and president, using Chicago as a case in point.

“Jewel Osco has 185 stores and a 36% market share, and while it’s a real local favorite, it may not always be the best format to serve every market,” Herkert said. “Some customers might find Save-A-Lot a more appealing offering.”

The discount format will be expanded rapidly, he added, including rural areas and existing markets. Growth will primarily come through franchisees.

“We will open 50 new stores this year, and have 100 projects already in the pipeline for next year,” Herkert said. “There is a broad opportunity in the United States demographically.”

The individual brands will be maintained, but with an increasing commonality of presentation where appropriate to leverage costs.”This is not an abandonment of traditional grocery,” Herkert said.

Second-quarter net sales were $9.5 billion, down 6.9% from the same period last year. Identical-store sales declined 4.8%. Net earnings were $74 million, down from earnings of $128 million in the year-ago quarter.

Supervalu has approximately 4,300 stores composed of approximately 1,200 traditional and premium stores, including 850 in-store pharmacies; 1,180 hard discount Save-A-Lot stores, of which 860 are operated by licensee owners; and 1,920 independent stores serviced primarily by the company’s traditional food distribution business.