Supervalu Inc CEO Craig Herkert has warned investors that the company’s transformation plans will take longer than expected after the US retailer posted a quarterly loss and downgraded its profit target for the full year.
Herkert said the second-quarter results were “disappointing to me and my leadership team” and led him to warn: “Frankly given this forward and anticipated economic recovery, we see a longer time line for our corporate initiatives to gain attraction.”
Supervalu Inc swung to a loss during the second quarter, posting a US$1.4bn loss for the quarter against a $74m profit in the same period last year.
Herkert said he remained focused on the retailer’s strategy to become “America’s neighbourhood grocer” with plans to continue its focus on “hyper-local retailing” and a focus on “customer-centricity”.
Speaking on an an earnings call yesterday (19 October), Herkert said: “The core of this vision is our unwavering focus on operating as one company winning for our customers. This means our stores will be merchandised locally, carry fresh perishables and relevant regional brands and cater to the fundamental needs of the shoppers who call these neighbourhoods home.”
Over the last 12 months Supervalu has been working on “aligning key reporting structures”, reviewing its store portfolio as well as “monetising select non-core assets”.
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Herkert said that the company has shifted from a “purchase-oriented model to a strategy focused on stocking and selling the products most relevant to our customers”.
Additionally, the Supervalu boss said the company is working to “regain our relevance to a customer who has multiple outlets to choose from to satisfy her grocery needs” through ensuring prices are fair, the quality of perishables improves, assortments are locally relevant and stores that are simpler to shop.
Through its SKU rationalisation programme, Herkert emphasised how Supervalu is improving its stores by removing redundant product sizes, “creating better in-stock positions, reducing labour costs and in most cases sharpening retail prices”.
Supervalu is also “engaging with its vendor partners” to discuss how the company can change its pricing architecture with the “shared goal of moving more units”. “As we are able to drive price points that are more competitive, shoppers are reacting with increased purchases that drive value for the manufacturer and build loyalty in our banners,” he added.
However, the disappointing results have not dampened Herkert’s plans to double the size of the retailer’s Save-A-Lot banner by the end of fiscal 2015, saying he is “pleased with the progress made to date”, and that it remains on track to open 100 new outlets by the end of the year.
Herkert remains focused on the company’s long-term profitability. “I understand my obligation to shareholders and the strategy, which we are executing, is intended to build an improved business model for Supervalu that will enhance our market position over time,” he said.
For more from the Supervalu conference call, please visit Seeking Alpha.