On a conference call with analysts, Supervalu's CEO Craig Herkert said its northeast banners (Shaw's, Acme and Shoppers) saw particularly intense price competition in their markets and suffered negative high-single digit declines. In Chicago, the Jewel-Osco chain saw "heightened competitive activity" with the entry of more discounters with comps winding up slightly above the corporate-wide rate. Comps in all other banners as a group improved almost 200 basis points from the second quarter, particularly in the west and at its Save-A-Lot limited-selection chain.
"At these banners, we believe our progress was a result of improved marketing, customer engagement, and price investments," said Mr. Herkert, a former executive at Walmart and Albertsons who took over as CEO of Supervalu in May 2009, on the call.
On the margin side, however, ineffective price promotions in carbonated beverages, soups and frozen foods failed to drive traffic. Items sold on promotion were 50 basis points higher than a year earlier and failed to drive profitable margin dollars.
"Our results continue to reflect a still difficult economic environment and the fact that it will take more time than originally expected to turn around our negative operating trends," he said.
Mr. Herkert noted that November marked the kickoff of its coordinated program to improve Supervalu's "price position and enhance value for our retail customers." The program includes advanced promotional analytics and planning tools that are expected to provide better insight into the extent and timing of pricing and promotions. Janel Haugarth also assumed the title of EVP of merchandising and logistics; the hope being that enabling one person to oversee both merchandising organizations will help Supervalu gain better prices on its buying clout and get its "fair share of promotional funds."
The merchandising changes feature a renewed focus on hyper local assortments, promotion and expansion of private labels, and a focus on "value with everyday fair pricing." The extension of its "Fair Price Plus" promotion strategy to produce helped fresh departments outpaced overall sales trends.
But, Mr. Heckert noted the challenge of making targeted "price investments" during a period of rising inflation. Food inflation rose 100 basis points for Supervalu in the third quarter, driven by meat, dairy and produce, and it expects food prices in 2011 to rise from three percent to 14 percent depending on the item.
"A core tenet of our vision is that pricing at Supervalu's traditional stores to be fair and no longer serve as a disincentive for customers to shop our banners," said Mr. Herkert. "As I have said before, I believe the thrift consciousness we are seeing in food retail is a secular shift, and we are positioning Supervalu to be a long-term partner of choice for communities we serve."
Other Supervalu banners include Albertsons, Cub, Farm Fresh, Hornbacher's and Shop ‘N Save.