Wayne Sales is moving quickly. The new Supervalu CEO, who took the helm of the beleaguered Eden Prairie, MN retailer/wholesaler on July 30, announced earlier this month that 60 underperforming stores will close, including four Acme units in the Mid-Atlantic region.
The Acme stores, which should be shuttered in the next 60 days, include units in: Sharon Hill, PA; Falls Township, PA; Glassboro, NJ; andStevensville, MD.Additionally, 27 Albertsons stores will be closed (19 in Southern California and eight in its Intermountain division whose stores are primarily located in the Seattle-Portland area), 22 corporately owned Save-A-Lot discount stores and one Jewel-Osco unit will also be closed. Eight additional stores are also targeted for closure, but Supervalu said that, due to ongoing contractual issues, the specific store locations are not being identified at this time. The latter group of stores is expected to be closed by the end of the company’s fiscal year in February 2013.
“These decisions are never easy because of the impact a store closure has on our team members, our customers, and our communities,” said Sales. “Today’s announcement reflects our commitment to move with a greater sense of urgency to reduce costs and improve shareholder value.”
As a result of the closures, Supervalu said it expects to record a pre-tax charge of $80-$90 million in fiscal 2013, with all but $3 million in estimated severance costs being non-cash. Of these amounts, $50-$55 million is expected in the company’s fiscal 2013 second quarter (ending September 8, 2012) with the majority of the remainder anticipated to be recorded in its fiscal 2013 third quarter. In addition, a pre-tax gain of approximately $10 million from the sale of departmental assets is expected in fiscal 2013 second quarter.
Over the next three years, the company estimates that closing these locations will generate between $80- $90 million in cash from monetizing owned real estate, eliminating cash operating losses, and selling departmental assets. The company owns the real estate for approximately one-third of the retail food stores being closed. Cash generated from these actions will be used to reduce outstanding debt and for other general corporate purposes. These closures will also be accretive to net earnings.
Ten days prior to the store closure announcements, Sales began restructuring Supervalu’s senior management team, “…to ensure alignment around the company’s goals and to better drive and execute the company’s business turnaround.”
“We are moving quickly to reinvigorate Supervalu, and that starts with leadership,” said Sales. “The changes I have made to my executive team are designed to address two of our most immediate priorities: driving profitable sales in our retail stores and taking costs out of the business. These efforts are critical to our successful turnaround.”
To address profitable sales growth, Kevin Holt has taken on an expanded role as president of Supervalu-retail. In this position, Holt will drive the overall strategy for the company’s traditional retail and pharmacy divisions, including overseeing the marketing and merchandising functions. He will work closely with Sales and his leadership team to clearly develop the company’s strategic platform. Holt came to Supervalu in May from Hudsonville Ice Cream and Kilwin’s Quality Confections inMichigan, where he was the president. Prior to that role he spent three years with Sears Holding Company (Sears/Kmart) and 13 years with Meijer, working in leadership positions of increasing responsibility in retail, information technology and strategic planning.
As part of this change, executive VP and chief marketing officer Michael Moore will now report to Holt, as will Tim Lowe, who has been promoted to executive VP-merchandising. With nearly 20 years of retail experience, Lowe most recently served as Supervalu’s senior VP-merchandising and served as president of the company’s Shoppers Food & Pharmacy division from 2010-2012.
In addition, Janel Haugarth has accepted the newly created position of executive VP- business optimization and process improvement. She will be responsible for identifying and executing strategies to make Supervalu a more streamlined, effective organization. During her 35-year career with Supervalu, Haugarth has had leadership-level exposure to every area of the company, and has been instrumental in developing and implementing successful business strategies. Most recently she was EVP-merchandising and logistics. The company noted that with Haugarth’s full-time focus on enterprise-wide optimization it will consolidate logistics and procurement leadership under Fred Boehler, who will now report directly to Sales as the senior VP-supply chain.
“The team we have in place includes exceptional leaders whose combined experience will help lead us through the revitalization of our business,” said Sales. “I believe this new leadership alignment will allow us to act quickly, efficiently and effectively to drive the successful turnaround of Supervalu.”
The company also named a new president of its 56 store Baltimore-Washington Shoppers Food & Pharmacy division. Robert Bly, a former Sears/Kmart executive, was named to the post last month. Bly worked with Kevin Holt, both at Sears/Kmart and Meijer.