By George Anderson
Supervalu's limited assortment concept, Save-A-Lot, has seen its business turn slightly southward as it deals with the impact of higher fuel prices, increased competition and the need to upgrade stores.
Jeff Noddle, chairman and chief executive of Supervalu, told analysts that the company remains confident about the banner's long-term prospects, "But it's not going to be a smooth ride all of the time."
Mr. Noddle said that higher fuel prices have left the lower-income consumers who shop at Save-A-Lot with less money to spend on food.
He also mentioned that the concept is seeing competition from all sides, including traditional grocery outlets and dollar stores.
"Everyone wants to sell consumable food today," he said.
To help Save-A-Lot licensees get righted, Supervalu plans to make an investment in store remodels. According to a report in the Star Tribune of Minneapolis, Supervalu estimates it will cost $20 million to $30 million to upgrade up to 300 stores. The company did not specify how much it would kick-in to help licensees complete planned remodels.
Eric Larson, an analyst with Piper Jaffray & Co., said many Save-A-Lot stores are in need of an upgrade noting, "When assets look tired, it does impact the performance."
Moderator's Comment: What do you see as the full story behind Supervalu's admission that Save-A-Lot's sales were running slightly negative? Are the challenges being faced by Save-A-Lot and the softness in its business a reflection of that operation alone or do they have implications for other limited assortment grocers, as well? - George Anderson - Moderator