Blog: Dean BestThe hard road ahead for US retail giant Supervalu

Dean Best | 13 April 2012

Supervalu, one of the largest retailers in the US, has had a tough few years and, although CEO and president Craig Herkert is trying to turn the company around, industry watchers believe it will be a challenge for the former Wal-Mart Stores executive.

This week, Supervalu reported its annual financial results and, for the third year running, gross profit, sales and identical-store sales fell.

Herkert, who joined Supervalu in 2009, insisted there were signs of improvement at the retailer, which is part-way through a "transformation programme". Over the last 12 months, Herkert said, Supervalu had a built a "strong foundation" and he expects "another year of solid progress" at the retailer.

However, Wall Street is unsure about Supervalu's prospects. The company's share price has tumbled over the last year amid concerns that it could break lending agreements. It has also been rumoured to be a target for private equity.

Concerns over Supervalu's covenants have dissipated but there remains questions over whether the retailer's transformation programme will pay off.

Herkert's plan to changes things around at Supervalu comes, one analyst told just-food, after he made some early mistakes when he joined the business. What's more, his plans are not the first such programme Supervalu has seen in recent years; previous CEO Jeff Noddle also tried his own "transformation" initiatives.

The retailer seems to have been looking to reinvent itself for the past half a decade and, as one analyst noted, it is hard to secure custom when you are a business looking to redefine yourself.

"The real question is: 'Once you've lost that customer and it's been five years do you really get them back?'," asked BMO Capital Markets analyst Karen Scott yesterday as we discussed just-food's In the spotlight article on Supervalu.

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