On the money: Supervalu in "active dialogue" on disposals
US retail operator Supervalu has indicated that it is exploring the possible the sale of unspecified parts of its business as it looks to return to profitable growth.
Supervalu has been dogged by falling sales and profitability for its last three full financial years and yesterday (18 October) the retailer confirmed the trend was continuing when it booked accelerating second-quarter losses.
For the second-quarter of the year, net loss totalled US$111m, up from $60m in the comparable period of last year, Supervalu revealed.
However, the company insisted that it is accelerating the progress that it is making on its turnaround plan.
Speaking during a conference call with analysts, Supervalu chairman and CEO Wayne Sales insisted that the company is "refocusing" on the "basic fundamentals of retailing" and "clearly defining points of differentiation".
"I remain committed to doing the things necessary to return SUPERVALU to profitable growth and to move with speed and an absolute sense of urgency," Sales insisted.
Sales took the helm at Supervalu when the company ousted then-CEO Craig Herkert at the end of July. He said that the group has accelerated its turnaround efforts since he took over, refinancing its credit facility, restructuring the leadership team and making the decision to close around 60 undreperforming stores.
Of the closures Sales commented: "I've said that we will make tough decisions and we will make them quickly, and this is one example of the pace with which we are moving. Although I prefer to opening stores, not closing them, the closure of these locations will allow us to better focus our efforts on driving profitable sales in the rest of our network."
Supervalu has defined its primary objectives as: driving profitable sales in its Supervalu banner, growing its Save-a-Lot brand, building on its "legacy" of serving independent retailers and - importantly - taking costs out of the business.
Sales insisted that progress is being made on all of these fronts. In addition, he revealed that the company is continuing to evaluate its strategic options as part of an ongoing review process. These "strategic alternatives" include potential disposals, Sales revealed.
"The company has received a number of indications of interest and is in active dialogue with several parties," he said. "There can be no assurance that this process will result in any transaction and we will not provide any further update today."
Responding to this news, Janney analysts acknowledged the potential to unlock "some value" for shareholders but remained cautious, emphasising the need to reinvest in the remaining business in order to improve performance.
"While Supervlau's exploration of strategic options could uncover some value, visibility is likely to remain low due to volume deleverage and necessary price investments," the analysts wrote in a note to investors.
According to Janney, the key risk going forward for Supervalu is growing competition in the US grocery sector.
"We view competition, not the economy, as the investable issue facing grocers broadly, and the space is only becoming more competitive with added alt channel square footage," the warned.
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