Supervalu shifts its focus to its deep-discount Save-A-Lot chain as it fights to combat lagging sales; Save-A-Lots are about a third the size of a traditional grocery store, are stocked almost exclusively with private-label products

Allison Oesterle

LOS ANGELES , December 19, 2011 (Industry Intelligence) – Burdened by debt, lagging sales and futile attempts to re-attract customers that it has lost to rivals, Supervalu Inc. shifts its focus to its deep-discount Save-A-Lot chain, the StarTribune reported on Dec. 15.

Sales at Supervalu’s stores have fallen for three straight consecutive years, and dividends on their stock have been reduced.

The price of one share of Supervalu’s stock has fallen by 85% since 2006, and roughly 50% since 2009.

Craig Herkett, the CEO of Supervalu said, "Our value proposition here, our business transformation, is a long-term proposition to make sure we are a great, relevant local retailer everywhere.”

In order to combat a lack of growth from its traditional supermarket banners, Supervalu has begun to focus on its deep-discount Save-A-Lot chain. Save-A-Lot stores, which are roughly three times smaller than the size of a traditional grocery, are stocked almost exclusively with private label products. They are thus both more profitable and less expensive to build.

In May, Supervalue announced that it was planning to open 160 Save-A-Lot stores during the next year, a number that was subsequently reduced by one-half in October.

The remainder of the money that would have gone to opening new Save-A-Lot stores will instead go towards remodeling Supervalu’s existing supermarkets.

Although investors remain skeptical that the chain can be saved, Burt Flickinger, the president of the New York City retail consultancy Strategic Resource Group, remains optimistic.

He notes that Supervalu’s distribution business, which accounts for about one-fourth of Supervalu’s total revenue, is both profitable and growing. He also thinks that an expanded line of product-label products will help Supervalu provide customers with more attractive and lower prices.

Still, Flickinger says, "It's still going to be tremendously tough in 2012."

The primary source of this article is the StarTribune, Minneapolis, Minnesota, on Dec. 15, 2011.

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