US supermarket group Supervalu said it plans to double the size of its underperforming discount chain Save-a-Lot over the next five years.
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Chief executive Craig Herkert told analyst on Tuesday (20 October) that it plans to take the number of its Save-a-Lot stores to around 2,400.
“This is not an abandonment of traditional grocery; this is an acceleration of Save-A-Lot,” Herkert said. “I am genuinely excited about the opportunity to grow this format.”
Herkert said the company had already put in place a number of changes to ensure this will happen.
“First, we’re lowering the capital requirements for Sav-A-Lot by 15% to 30% through redesigning the store layout, reducing the leasehold and fixing requirements and greater utilization of used equipment,” Herkert told analysts.
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By GlobalDataHe added that the group was anticipating opening 50 Save-A-Lot stores this year, with over 100 projects in the pipeline for next year.
The Minneapolis-based company yesterday cut its full-year earnings as it struggled to gain traction with shoppers.
The group earned US$74m for the second quarter, down from $128m a year earlier.
Revenue fell 7.5% to $9.46bn. Second-quarter retail food net sales dropped to $7.4bn from $8bn in the previous year, reflecting a 4.8% drop in identical-store sales and store closures.
“I’m being realistic when I say there is much need for improvement in our everyday execution; this will be a near-term imperative as we work on getting the basics right,” Herkert told investors.
“The early parts of this quarter have been tough,” Herkert said when asked to characterise the company’s worsening same-store sales trends in the new selling period.
He added that Supervalu will remain promotional but that only Save-A-Lot will offer the lowest everyday prices.
“The American consumer’s shopping habits have changed probably forever – certainly for a long time. I don’t think we are going to wake up in a few months and everybody will be back to 2006,” he added.
Quotes from the conference call were taken from a transcript provided by Seeking Alpha. For the full transcript visit the Seeking Alpha website.
