Tuesday, July 31, 2012

Supervalu (NYSE:SVU) - CEO Out, Chairman In for Turnaround

The reports of bleak quarterly results and the company going up for sale were going around for some time, but the firing of SUPERVALU INC.’s (NYSE:SVU) CEO Craig Herkert and chairman Wayne Sales being approached to lead its re-launch is certainly astonishing.

Sales has promised to devise new strategies and take decisions based in the best interests of The Eden Prairie, Minn.-based operator of Albertson's, Jewel-Osco and other grocery chains. According to Sales, time is the only factor standing in the company’s way.

Target Corp. and Wal-Mart Corp have given severe competition to Supervalu and numerous supermarket chains in recent years. The dollar stores and drugstores are no less, because they are offering extremely low prices to snare customers. Even if Supervalu is compared among its peers, it does not look to be in good shape. The organization suspended its dividend and stated that they were reviewing its options with financial advisers, after their profits and revenue experienced a sharp drop in the first quarter of the year.

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Supervalu will reduce administrative costs by 250 million in the coming years and Herkert’s firing may be the first step in restoring value to their tarnished marketing strategies. Interestingly, Herkert was a Wal-Mart Stores Inc. executive, had tried the concept of positioning the grocery chain as a neighborhood store, but the strategy failed miserably.

Sales is the retired vice chairman of Canadian Tire Corp. and was its president and CEO from 2000 to 2006 and he has stated that changes with be done as urgently as possible in their retail food business in order to decrease prices and also create points of sustainable differentiation for their customers.

Bankruptcy filing is not being considered as of now. Sales will concentrate on their Save-A-Lot ventures, which have shown decent profits. These stores are smaller and only private-label brands can be purchased here. Philip Francis, who is a board member, was appointed as lead director on Monday. Supervalu's shares rose 25 cents, or 12.6%, to close at $2.24.

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