Can SuperValu turn it around?

Craig Herkert is the recently hired CEO at SuperValu and announced a faster growth strategy for the chain’s Save-a-lot small-format store. Retail Wire panelists weighed in recently on the subject:

Mr. Herkert has only been at the SuperValu helm for five months, but he has a big turnaround task in front of him:

1. Judging from the last quarter, it looks like wholesale distribution has declined to only 30% of SuperValu’s revenues. At one point this was the company’s core competency, but Target and doubtless other accounts are moving toward self-distribution as a way of controlling their own supply chain costs effectively.

2. SuperValu has made acquisitions in the traditional grocery business (such as Albertson’s) at a time of long-term decline for this business. One parallel would be the merger of two lagging regional department stores…there may be short-term benefits of scale but SuperValu is fighting bigger competitors such as Kroger and Safeway, not to mention the inevitable shift of share to supercenters.

3. The Save-a-lot strategy seems sound, but Aldi already has a national head-start with this concept and Walmart is right around the corner. The question is whether SuperValu can roll out Save-a-lot quickly enough to move the revenue and profit needle…or whether it might trigger divestiture of some of its lagging businesses to make it happen faster.

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