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Herkert Out as Supervalu Chief, Former Canadian Tire CEO In

July 31, 2012Written by George Anderson

Craig Herkert said Supervalu's prices were too high and needed to come down quickly when he arrived as CEO of the company in 2009. He pledged to cut costs and so he laid off headquarters personnel and closed underperforming stores in chains such as Acme, Albertsons and Shaws. Mr. Herkert said there was an opportunity to grow the limited assortment grocery concept Save-A-Lot and new store openings followed.

Ultimately, however, the former Walmart exec failed, as was made clear in the past month when Supervalu announced it was looking to sell all or parts of its business. So, now Mr. Herkert is out and in comes another CEO, Supervalu chairman Wayne Sales who also happens to be the former top executive at Canadian Tire.

So what does Mr. Sales have planned for Supervalu?

"We will take significant cost out of the business, and move with urgency in our retail food business to lower prices and create points of sustainable differentiation for our customers," he said in a statement. "We will work closely and collaboratively with independent retailers to ensure that they continue to receive the superior service they need to increase sales and profitability. We will strengthen our engagement with our Save-A-Lot licensees — leveraging their expertise, enhancing our collective performance, and ensuring our ability to grow a nationwide network of hard discount stores. As we execute our business plan, the Board will continue its review of strategic alternatives, and I am still leading that process."

That sounds pretty much as though Mr. Sales intends to continue the plan put in place by Mr. Herkert. So, what's up with that?

According to a Star Tribune report, analysts such as Jonathan Feeney of Janney Capital Markets said Wall Street had lost confidence in Mr. Herkert's ability to turn the company around, and that could dampen interest in acquiring Supervalu assets.

"While this move alone doesn't inspire confidence, it removes a key perceived hurdle in the company's review of strategic options," Mr. Feeney wrote in a note to investors.

BMO Capital Markets analyst Karen Short told The Wall Street Journal that it will take more than lower prices to get Supervalu turned around. Based on Mr. Sales' experience at Canadian Tire, she is looking for him to focus on points of differentiation beyond price.

"The challenges may prove to be insurmountable at this stage for even the most exceptional food retail executive given Supervalu's market share losses, lack of brand equity, and lack of resonance with the customer," Ms. Short told the Journal.

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