retail news in context, analysis with attitude

Dow Jones reports that Supervalu - with a third quarter loss of $202 million, compared to a year-ago Q3 profit of $109 million, and an almost six percent revenue decrease to $8.67 billion - continues to struggle with how to get its prices in line with lower-priced competitors at a time when suppliers are raising their prices.

“With all of our major vendors announcing their intentions to pass along rising costs, we expect store prices to rise throughout the calendar year," CEO Craig Herkert said during an investors conference call. Herkert said that prices on items could increase anywhere from three percent to 14 percent, depending on the item and category.

According to the story, “The company will host a vendor summit later this month with its top 400 manufacturers to negotiate more effective partnerships and better pricing. ‘For the company's business transformation to be effective, it's imperative we get the lowest cost of goods going forward,’ Herkert said. ‘Based on company-wide buying power, we can act as one company with our vendors and leverage initiatives’.”

Among the other comments made by Herkert:

• "We know the long-term journey is to get all of our prices in line with where our customers expect them. We're doing so granularly. Where we've done so, we see positive movement.”

• "We know what we have to do, and we have the metrics and tools to get it done. But it won't happen overnight. It's a multi-year journey.”

• "We are pursuing a hyper-local strategy to restore our relevance and build customer loyalty, especially in the northeast.”

Herkert also said there are no plans to sell any of the company’s banners.

"Today's market is a buyer's market, not a seller's," he said. "If there are opportunities to do some things that are beneficial, we'll certainly evaluate them, but we do not feel under pressure that we must divest of any particular assets at this point."
KC's View:
If you wanted to hold a convention of people who really believe that Supervalu is not looking to sell companies like Shaw’s if it can get an acceptable price, you’d only need to rent a phone booth. (For those of you who have no idea what a phone booth looks like, please go to Google. It is a quaint and at one time ubiquitous structure from a previous era.)

One MNB user commented to me in an email that with all the moves being made by Supervalu, it looks less like the company has a strategic plan and more like “it is moving the deck chairs around on the Titanic.”

Which is true. On the other hand, it is fair to say that the Titanic didn’t have to hit the iceberg. Neither does Supervalu. The problem is, I’m not picking up a lot of confidence in the marketplace about the moves the company has been making.