Supervalu Grows on Private Label

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October 25, 2011

Supervalu posted a profit for its second quarter thanks to private label growth and marketing prowess, but sees a rocky economic road ahead.

Craig Herkert

The supermarket chain managed to post a profit in spite of lower top line results, negative same-store sales and essentially flat unit sales. Management credits store brands success and marketing initiatives for the profit gains, and will continue to focus on both going forward.

Supervalu continues to expand its selection of value-oriented products under the Shopper’s Value label. “Into the second quarter, we have devoted more displays and shelf space to these items, including 10-for-$10 merchandise and entry-priced private label brand offerings like $1 pizzas,” Sherry Smith, CFO and executive vice president said during a second quarter conference call with analysts. “By the end of the fiscal year, we will have added 80 new items under our Shopper's Value label.”

Essential Everyday
The company’s umbrella brand, Essential Everyday, which began rolling out to its family of stores this summer, now includes 140 items. Essential Everyday will continue to expand through the winter, Craig Herkert, president and CEO, told analyst. “This national brand equivalent has been introduced in high-engagement, high-traffic categories: cereal, pasta, pasta sauces.” Additional categories for the store brand will include canned vegetables, condiments, dressings and frozen foods.

Shoppers have responded well to the Essential Everyday brand, Herkert said, but noted economic pressures are still causing them to trade down to lower priced national brand alternatives like Shopper’s Value. “What we see is trade down,” Herkert said. “We're doing well with our value brand, we're doing well with private label.” Management expects shoppers to feel continued economic pressure, telling analysts growth will continue to be stunted through the end of the year.

Supervalu posted a 60 basis point improvement in private label sales for the second quarter, thanks to Shopper's Value and the chain’s 10-for-$10 program. Going forward, Supervalu will remain a promotional retailer with a focus on price.

But not all Supervalu shoppers are as affected by the economy or making choices based largely on price. In less affected markets, the grocer’s Culinary Circle and Wild Harvest organic lines continue to perform well, Herkert said. “But it is clear there's a huge chunk of America that remains stressed, particularly [during] certain times of the month. And what we're doing is merchandising to that consumer, making sure that we're relevant.”

Supervalu plans to open 80 to 90 new limited-assortment Save-A-Lot stores this year; down from the 160 originally intended thanks the arrival of a new CEO, Santiago Roces, who joined Save-A-Lot less than six months ago. The product assortment at Save-A-Lot stores skews heavily toward private label products.

In all, the company reported second quarter fiscal 2012 net sales of $8.4 billion and net earnings of $60 million, compared to a loss of $1.5 million for the second quarter in the prior year. Margins remained essentially flat. Same store sales at Save-A-Lot stores rose 3 percent.

Supervalu's store banners include Albertson's, Acme Markets, Jewel-Osco, Shaw's, Star Market, Shop 'N Savem Cub, Lucky and Farm Fresh.

Read These Related Articles:

• Store Brands Gain Share in Significant Categories
• Safeway Private Label Grows Faster than National Brands
• Winn-Dixie Boosts Store Brand Penetration by 20 Points
• Kroger Sees Significant Store Brands Growth
• Kroger Store Brands Tally Double-Digit Sales Increases

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