retail news in context, analysis with attitude

The Wall Street Journal this morning has an interview with Craig Herkert, Supervalu’s new CEO, in which he discusses the new direction in which he is taking the company in an troubled economic environment. Some excerpts:

On the economy: “The way we talk about it internally is, expect that this is the new normal. Now, one would certainly hope that we're not at 10% unemployment as the new normal. By the new normal, I mean the customers' focus on value.”

On pricing: “In too many cases, we've trained our customer to only buy certain goods when they're on promotion, because we've allowed the gap between the promotional price and the regular price to become too great.

“So the regular price on product X was $4.19 and the promotional price was $2.99. Maybe the regular price should be $3.49 and the promotional price maybe stays at $2.99. But if I can sell more at regular price and not send my customers down the street ... I'll be much better off.”

On expanding the Save-A-Lot limited assortment chain: “The average household income of the Save-A-Lot shopper is $40,000 a year. That's about half the U.S. population. There is an underserved market segment there ... We have gotten approval from our board to reduce our dividend next year and we intend to primarily invest the proceeds of that to grow our Save-A-Lot business. We've also reduced costs for our Save-A-Lot licensees by 20% to 30%.”
KC's View:
The question not answered by Herkert in this interview is which divisions of the company will be sold in view of the new normal. Most people seem to agree that Bristol Farms will be sold off sooner rather than later; Shaw’s is the other division that seems to be the other that, because of a relentless pursuit of the middle, is likely to be at risk of a sale.

There seem to be two popular theories about what could happen to Shaw’s, by the way. One is that Kroger buys the whole thing and totally changes the competitive set in New England. And the other is that Delhaize/Hannaford and Ahold/SAtop & Shop buy Shaw’s and split it, with Hannaford getting the southernmost stores and Stop & Shop getting the northern units.

Fun to speculate. But for the record, I have no idea how much of this stuff may be accurate.