retail news in context, analysis with attitude

Supervalu announced yesterday that it will sell 36 Albertsons stores in Utah to Salt Lake City-based Associated Food Stores. According to the Salt Lake City Tribune, “Under the sale, Supervalu would receive $150 million in after-tax proceeds.”

According to the announcement, Dick King, vice president of Associated and a 36-year veteran of Albertsons where he served for a time as president/COO, will become president of the new 36-store division.

Associated Food Stores currently services over 500 independent grocery stores throughout seven Intermountain Western States. Companies in Utah such as Harmon’s, Ream’s, Winegar’s and Kent’s are members of the retailer-owned cooperative. The company also owns 22 stores operating under the Macey’s, Dan’s, Lin’s and Dick’s Market banners.

“We will drop prices on a significant number of items in the store and begin carrying the popular Western Family brand,” said King in the official announcement. “In today’s market, customers want top-quality products at a great price. Our first priority will be to deliver on both fronts.”

In a memo to Supervalu employees, CEO Craig Herkert wrote that in view of disappointing second quarter numbers reported yesterday, it is critical for the company to “continuously take advantage of opportunities to strengthen our overall business. Unfortunately, this sometimes means selling stores that are not a strategic fit … As you can imagine, the decision to sell any of our stores is not taken lightly. We understand that these transactions can significantly impact our associates and our customers. However, the sale of these stores will ultimately enable us to both pay down debt and drive growth in other areas of our business.”

And, Herkert wrote, “The numbers clearly indicate that we are not, as a company, where we need to be in terms of sales results. Given that, we need to take immediate steps to reposition ourselves to better compete in today’s marketplace.”
KC's View:
It seems pretty clear that Herkert is not done remolding the company in an image that he believes will work both short-term and long-term.

The question is, what’s next? Which banners fit his vision for Supervalu, and which ones do not? A lot of the speculation I’m hearing has centered on Bristol Farms and Shaws…but this all depends on what Herkert wants Supervalu’s retail tapestry to look like.

It seems likely, however, that this won’t be a long decision-making process.