Supervalu Private Label Rises Since Pulling Management In-House

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April 19, 2011

The past 12 months at Supervalu have been marked by rightsizing and restructuring for future success, which included pulling private label management in-house a year ago, which is yielding positive results.

Craig Herkert

“We have brought management of private brands in-house and improved sales penetration by 145 basis points [or 1.45 percent] to 19.3 percent in Q4,” Craig Herkert, president and CEO said during a fourth quarter conference call with analysts. “We also took the initial steps to implement fair pricing plus promotion by lowering prices on key items across our network of stores. “

Although it reported same-store sales declines of 6 percent for the recently ended fiscal year, Supervalu told analysts it forecasts improved same-store sales for the coming fiscal year of between negative 1.5 percent to negative 2.5 percent.

“In the past 12 months alone, we removed over $175 million of expenses. These are permanent structural savings and a testament to the tough decisions we are making to right-size infrastructure and hold business units accountable for their spending,” Herkert said.

When asked how Supervalu will utilize private label to mitigate inflation,” Herkert said: “The team is completely focused. I think moving this thing in-house was a big deal. We're integrated; it's part of our category business planning, the private brands are part of it. And it's a multi-tiered strategy that will really focus on offering consumers a broad range of private brands… it's a key part of our opportunity. I think our customers have shown a great willingness to buy our very good private brands.”

Herkert noted the company will discuss its private label strategy in more detail during its Investor Conference scheduled for May 3.

Financial Results
For the fourth quarter ended Feb. 26, Supervalu reported net sales of $8.7 billion and net earnings of $95 million (declines of 5.8 percent and 2.1 percent respectively), compared to net sales of $9.2 billion and net earnings of $97 million in the year-ago quarter.

The change in net sales primarily reflects identical store sales of negative 5 percent, store closures, and market exits, according to Supervalu.

Gross margin in the fourth quarter was $2.02 billion, or 23.3 percent of net sales, compared to $2.16 billion, or 23.4 percent of net sales last year.

Supervalu reported full-year net sales of $37.5 billion (down 8.3 percent) and a net loss of $1.51 billion compared to fiscal 2010, when the company reported net sales of $40.6 billion and net earnings of $393 million.

"Today, we are aligned and working toward the common goal of delivering greater value to our customers,” Herkert said.” We enter fiscal 2012 with momentum, a solid plan and new capabilities to drive our business transformation, invest in price and deliver sequential improvement to [same-store sales]."

SBD Views: It’s clear that Supervalu is committed to continued investment and expansion of its store brands program and is confident in its new store brands model. -- John Failla for Store Brands Decisions

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