Supervalu said it would continue to take actions to improve operations in its struggling retail division, including selling underperforming locations, as the company shifts its primary focus to integrating the recently announced acquisition of Unified Grocers.
Meanwhile, the wholesale division of the company showed gains in the recently ended fourth quarter and fiscal year from both new customers and expanded sales to existing customers.
In a conference call discussing financial results, Mark Gross, president and CEO, said the company was focusing a greater proportion of its capital investment on its Cub Foods and Hornbacher’s banners, while reviewing and optimizing its entire retail portfolio.
“The challenging operating environment in our markets remains largely unchanged” from previous quarters, he said. “We continue to feel the impact of competitive new store openings against over half of our retail stores.”
Identical-store sales in the retail division were down 5.8% in the fourth quarter,
including a 4.3% decrease in customer counts and a 1.5% decline in average basket size. In addition, product price deflation was about 1% in the fourth quarter.
Gross said the company was seeking to sell its weaker retail locations.
“We are in the process of marketing a number of underperforming stores, where disposition would allow us to focus on a core base of stronger stores,” he said.
In January, Supervalu hired Target veteran Anne Dament as SVP of retail, merchandising and marketing to oversee Supervalu’s retail division, and she has been spearheading a range of initiatives to improve the performance of the stores, Gross said.
These include accelerating the rollout of category management to better match product assortments to customer preferences and customize offerings by store location, adding more meal solutions and grab-and-go offerings, and expanding the variety in the produce and deli departments.
Bruce Besanko, EVP, COO and CFO, said Supervalu plans to continue to open new stores in the Hornbacher’s and Cub Foods regions.
He also said the 22 Food Lion stores that Supervalu acquired from Delhaize in the Mid-Atlantic region last year Have performed “a little below expectations, particularly on the sales line.”
Those stores have been converted to Supervalu’s Shop ‘n Save banner and plans call for them to be marketed for sale to Supervalu’s wholesale customers, he said.
Overall retail sales were down 3.2% for the fourth quarter, to $1.07 billion. The company reported an operating loss of $27 million for the quarter in the retail division, including a $41 million asset impairment charge. Excluding the charge, retail operating earnings were $14 million, versus $30 million in the year-ago…