Supervalu Knocks It Out Of The Park In Huge 3rd Qtr.
The amazing turnaround for Eden Prairie, MN-based Supervalu continues. This time at an even more impressive rate, as the large wholesaler/retailer posted its best numbers in more than a decade in its recently completed fiscal third quarter ended November 29.
All segments of SVU’s business showed improvement, as overall sales at its Independent Business unit increased 2.4 percent, Save-A-Lot’s ID sales grew 6.9 percent and Retail Food ID revenue (Shoppers, Farm Fresh, Cub, etc.) were a positive 2.3 percent. Adjusted earnings for the third quarter were $49 million (up from an adjusted figure of $33 million last year) on net sales of $4.2 billion, up from $4.01 billion in the corresponding period last year.
“We passed an important milestone this quarter delivering positive sales increases in all three of our business segments for the first time in many years,” said president and CEO Sam Duncan. “I’m very encouraged to see our Independent Business segment post higher sales compared to last year’s third quarter, and I remain pleased with the continued progress we are making in our retail stores. Save-A-Lot had another good quarter from a sales perspective while also delivering a higher operating margin compared to the second quarter. Overall, the third quarter provided many positives for us to build on during the final quarter of our fiscal year.”
A closer look at each of Supervalu’s operating units revealed that its Independent Business net sales were $1.96 billion compared to $1.91 billion last year, an increase of 2.4 percent, primarily due to increased sales to existing customers and new accounts partly offset by lost accounts, including one New Albertson’s, Inc. banner that completed the transition to self-distribution.
Independent Business operating earnings in the third quarter were $60 million, or 3.1 percent of net sales. Last year’s Independent Business operating earnings in the third quarter were $53 million, or 2.8 percent of net sales. Independent Business operating earnings in the third quarter of fiscal 2014 were $57 million, or 3.0 percent of net sales.
Third quarter Save-A-Lot net sales were $1.08 billion compared to $991 million last year, an increase of 8.9 percent, primarily reflecting the impact from network identical store sales of positive 6.9 percent and new store openings. Identical store sales for corporate stores within the Save-A-Lot network were positive 8.5 percent. Save-A-Lot operating earnings in the third quarter were $34 million, or 3.2 percent of net sales. Last year’s Save-A-Lot operating earnings in the third quarter were $40 million, or 4.1 percent of net sales. The decrease in Save-A-Lot operating earnings was primarily due to higher advertising, employee, and occupancy costs.
At its Retail Food banners net sales were $1.12 billion compared to $1.06 billion last year. The increase was primarily due to newly acquired stores and identical store sales of positive 2.3 percent. Retail Food operating earnings in the third quarter were $28 million, or 2.5 percent of net sales. Last year’s Retail Food operating earnings were $25 million, or 2.3 percent of net sales.
All told, it was another outstanding quarter for SVU with virtually all components of its business now operating at a very high level. And with the announcement late last month that it acquired two former Albertsons stores as part of the divestiture arrangement and would supply 64 Haggen units in the Northwest as well as provide transition services to the remaining 82 units in California and Arizona that Haggen acquired as part of the same mandated Safeway/Albertsons store divestitures, increased wholesale revenue is coming as soon as the next quarter.
In less than two years Sam Duncan and his primarily new leadership team have accomplished what many industry observers believed could not be done – he not only saved Supervalu, he reshaped the once formidable company into what it was before Jeff Noddle and Craig Herkert tried very hard to destroy it.
Jeff and Craig who?
‘Round The Trade
Bottom Dollar Foods, the four year Delhaize America retail discount experiment gone horribly wrong, is closing its doors for good on January 15. The shuttering of the company’s 66 stores in the Delaware Valley and Pittsburgh/Youngstown markets will affect approximately 2,200 associates. Expect new buyer Aldi to begin the conversion process late in the first quarter with possible openings to begin in late summer/early fall. However, don’t be shocked if, due to location conflicts and other issues, only about half of the former BDF locations are reopened as Aldi units. Aldi, one of the hottest retailers both in the U.S. and Europe, has also begun testing credit cards in upstate New York and Minnesota in an attempt to broaden its customer base and provide greater convenience to its current shoppers. Some might question whether the 2 percent credit card fee will impact Aldi’s bottom line (we won’t know because it’s a privately-held company) or whether those costs will be passed along, but the way the Aldi “express” is rolling, I can only see this as helping the overall shopping experience at the industry’s deepest discounter. About 45 stores are part of the test, and if all goes well, look for Aldi to rollout the credit card program nationally…Marc Perrone was elected the new president of the United Food and Commercial Workers International last month. Perrone replaces Joe Hansen, who retired from the large labor organization after 10 years of leadership. Perrone was the UFCW’s secretary-treasurer for the past decade and will be succeeded in that post by Pat O’Neill. “The ideas to build a stronger union do not lie within any one individual,” said Perrone. “They lie within all of us. They lie in the collective wisdom and strength of 1.3 million UFCW members who work hard every day to support their families. I want to hear their ideas. I want to hear their vision. I want to hear what we can all do to become an even greater and stronger union for the decades ahead.” Much like Hansen, Perrone will face many challenges, including the further penetration of non-union retailers (including virtually all non-supermarket channels), which have gained significant market share over many organized supermarkets. While potentially organizing those non-union merchants will be a tall task, making the playing field more level for current unionized merchants is almost equally important…Natural Market Food Group (NMFG), parent firm of Mrs. Green’s Natural Markets, has named Tim Milano chief merchandising and marketing officer. Most recently, Milano served as merchandising chief for Fresh Direct, the dominant online grocery retailer serving the five boroughs of New York City. Milano was chosen by new CEO Pat Brown, who joined NMFG last summer in what is proving to be a massive turnaround made necessary by former NMFG chief executive Robin Michel…the Specialty Food Association has created a Hall of Fame whose mission is to “honor individuals whose accomplishments, impact, contributions, innovations and successes within the specialty food industry deserve praise and recognition.” The inaugural class includes 114 inductees including (these are people I’ve met over the years): David Anderson, Sr. and his dad Harold Anderson, founders of Haddon House; Ann Brody, Sutton Place Gourmet; Gerry Santucci, Santucci Associates; Fred and Bluma Schlossberg, Castle Food Products and brothers Eli, Saul and Stanley Zabar, Zabar’s and Eli’s Markets. Kudos to all who made this prestigious list…and speaking of Halls of Fame, congratulations to Randy Johnson, Pedro Martinez, John Smoltz and Craig Biggio, who earlier this month received notice that they will be entering baseball’s loftiest club. All are deserving. And whether known, or at least highly suspected, steroid users like Barry Bonds or Roger Clemens deserve to be voted in is a personal choice that the baseball writers face every year. But what’s not acceptable are votes for players who shouldn’t even be considered for the hallowed hall. In the last two years, players like Hideki Nomo, Jacques Jones, JT Snow, Armando Benitez and Aaron Boone all received votes, some from baseball writers who have been retired or who no longer follow the day-to-day action. To cast a vote for Nomo, whose career major league record was 123-109 in 12 big league seasons, or JT Snow, whose MLB batting average for 146 years was .268, is a joke a potentially takes away votes from worthy candidates such as Alan Trammel or Fred McGriff, who are at least worthy of consideration. In short, the Hall of Fame needs to expand the ballot to 15 choices (up from the current 10), include media other than current members of the BBWAA (Baseball Writers Association of America) who also follow the game closely, and look to weed out members whose day-to-day connection to baseball is no longer relevant…back to industry news: Randall Onstead, who began his grocery career working for his father at Randall’s Supermarket in Texas (now owned by Albertsons/Safeway), will be leaving his post as president and CEO of Bi-Lo Holdings on March 1. (Just before presstime, published reports said that Mark Prestidge, EVP and COO since January 2013, had resigned from the retailer effective December 31.) Onstead partnered with PE firm Lone Star Funds late last year to attempt to take the 830 Bi-Lo and Winn-Dixie stores public (Southeastern Foods). However, after a “road show” to test the potential funding interests of the financial community was tepid at best, the project was scrapped. Clearly Randall Onstead is not interested in the long-term welfare of 830 mediocre stores in the Carolina, Georgia and Florida.
Local Notes
As Albertsons prepares to officially acquire Safeway, it continues to realign its leadership teams both corporately and regionally. In addition to Steve Burnham being named Eastern division president of Safeway a few months ago, the Pleasanton, CA and Boise, ID retail chain has named Tom Lofland as VP-marketing and merchandising for the 125 store unit. Lofland, who begin his career with Albertsons in the mid-90s, most recently served as VP-center store for Abingdon, VA-based Food City (K-VA-T Foods). He also did a three year tour of duty for Supervalu as corporate director of merchandising, sales and planning. Other corporate changes include a few Safeway veterans who once supervised the Eastern division – Brian Baer, who most recently presided over Eastern, now becomes VP-retail finance/north for the soon to be combined organization and Karl Schroeder – who oversaw the Eastern division from 2002-2004 before being named president of the much larger Northern California division – now becomes senior VP-corporate merchandising. Expect more changes and tweaks to follow at the divisional level in the next few months…the Skyland Town Center in Southeast Washington (Anacostia), one of the six units that Wal-Mart said it would build in the District of Columbia five years ago, is back on the grid after doubts sprang up about whether the store would ever be built. We’re told that Wal-Mart officially signed a lease to build a modified SuperCenter (100,000 square feet) in the underserved area in November. Wal-Mart’s first two DC stores, which opened in 2013, have been doing big business. From the Wal-Mart legal department: the Pennsylvania Superior Court of Appeals has upheld a ruling that the Bentonville, retailer must pay $187.6 million in back pay to associates who worked “off the clock.” Wal-Mart said it is considering an appeal to the state Supreme Court stating that associates’ claims should not have been bunched together to form a class action suit. The original suit was first filed in 2002. One more Wal-Mart take: I honestly believe that CEO Doug McMillon is trying hard to change the culture at the Behemoth and also its public image. To wit: along with the recent leadership team changes, McMillon – who took the top spot in February 2014 – recently told journalist Charlie Rose that in the next few months all Wal-Mart associates will be paid above the federal minimum wage ($7.25 per hour)…Associated Wholesalers, Inc., (AWI), has set a deadline for vendors to file claims against the company. According to a court ruling made last month in U.S. Bankruptcy Court in Wilmington, DE, suppliers have until February 6 to file a reimbursement claim. Now that the busy holiday season is over, it will be interesting to watch how many retailers will align themselves with a new wholesaler. C&S Wholesale Grocers certainly has the upper hand, having purchased AWI’s assets for $288 million, while also gaining co-control of certain leases and a direct link to the front end/IT systems that AWI members and retailers utilize. After talking to several dozen AWI and White Rose independents, our best guess is that approximately 15 merchants have switched from AWI/C&S to Supervalu, Bozzuto’s, Wakefern and MDI, which would represent a small number of changes at this point…just before presstime, Weis announced a new round of price freezes that will run through April 5 affecting more than 2,000 products. This marks the 12th round of price freezes since the program begin in 2009…Ahold announced that Jan Ernest de Groot has been appointed chief legal officer and a member of the international retailer’s executive committee, effective February 1. He will report to CEO Dick Boer and have oversight of legal affairs, governance and compliance. He joins the Dutch retailer from TNT Express and will be based in Zaandam, the Netherlands.MOM’s (My Organic Market) plans to open its second Philadelphia-area store and its 13th overall next spring in a new development at 34 South 11th Street. The New MOM’s unit will be 16,000 square feet in size. The Rockville, MD organic merchant opened its first unit in Washington, DC in November and I know CEO Scott Nash has his eye on other new markets, too…Village Super Markets, the second largest ShopRite member and only publicly-traded retailer in the Wakefern organization, announced significantly improved earnings and increased same store sales of 1.6 percent in its first quarter ended October 25. Net income was $3.88 million compared to a net loss of $6.83 million in the first quarter of fiscal 2014. This year’s first quarter of fiscal 2015 included a charge to write off all remaining insurance receivables related to Superstorm Sandy of $1.34 million. Excluding that item, net income increased 53 percent. Overall sales were $379.7 million, an increase of 6.4 percent. The Springfield, NJ merchant, whose two Maryland stores (in Timonium and Silver Spring) have ramped up sales over the past year, stated that revenue rose due to the opening of its Morristown, NJ replacement store in November 2013 and also its Union, NJ replacement unit in April 30, 2014. The 29-unit retailer said same store sales rose due to increased sales in both Maryland stores and increased transaction size due to inflation, partially offset by decreased units sold. The company expects same store sales in fiscal 2015 to range from flat to an increase of 2 percent. In related news, the estate of former Village CEO Perry Sumas sold about 33 million shares of stock in several separate transactions over the past month. According to SEC records, the Sumas estate still owns 1.17 million shares in the company, valued at approximately $29.6 million. At the end of the day on January 7, Village’s stock was trading at $27.52 per share… Murry’s has moved its corporate headquarters from Upper Marlboro, MD to a new location – 7852 Walker Drive, Suite 420, Greenbelt, MD 20770. The retailer and frozen food manufacturer will maintain its same phone number (410-420-6400)…sadly, we have several notable obituaries to report this month. From the grocery industry, our condolences to the family of Jim Leonzo, who passed away late last month. Jim was most recently a sales and merchandising specialist for Giant/Martin’s (Ahold USA). He spent 47 years with the Carlisle, PA operator and, just before he retired in November, I had a great conversation with him at the opening of the new Giant replacement store in Hampden Township, PA. Leonzo began his career at Giant in 1967 as a journeyman meat cutter…also passing on was Sonia Diamond, wife of the late Paul Diamond, one of the three founders of the legendary Food-A- Rama chain. A Holocaust survivor, Sonia was always kind and sweet and provided a rock solid foundation as Paul, his brother Dave and Ben Schuster built the company from a small Baltimore City independent to a powerful regional discount merchant…Elly May is dead. Yes, Donna Douglas, who played tomboy Elly May Clampett on the hit sitcom “The Beverly Hillbillies” (1962-1971) has passed away at the age of 82. A native of Zachary, LA, Douglas actually had milked a cow before she was asked to udderize a goat during the audition for the memorable role. And, when it came to attractive women, Elly May had it all over her cousin Jethrine Bodine (Max Baer Jr., who also played Jethro Bodine). While she became typecast because of her success and exposure as Elly May, Douglas also starred opposite Elvis Presley in the movie “Frankie and Johnny” (1966) and appeared in one of the most memorable episodes of Rod Serling’s “The Twilight Zone” – “Eye of the Beholder.”…from the world of sports, entering relief pitcher heaven is Stu Miller, who had a productive 16 year career hurling for the Giants, Cardinals, Phillies, Orioles and Braves. In 1958, he led the National league in ERA and had the most saves in the NL in 1961 and in the AL in 1963. Miller was also part of the Orioles first World Series championship in 1966. However, despite all of those notable achievements, Miller was probably best known for committing a balk in the 196
1 All-Star game at windy Candlestick Park, his home field. As he was getting ready to pitch in the ninth inning, a gust of wind came along and literally blew Miller off the mound. His balk ultimately led to the American League tying the game. However, when Hall of Famers Willie Mays and Roberto Clemente knocked in runs in the bottom of the 10th, Miller wound up as the game-winning pitcher. Miller was 87…I’m sad to also note the death of Fred “Fuzzy” Thurston, former All-Pro guard on the great Green Bay Packers teams of the early 1960s, who has died at the age of 80. The Wisconsin native, who only played basketball in high school because his school did not have a football team, was drafted out of Valparaiso University in Indiana in the fifth round by the Eagles in 1956. He never played for the Iggles, having joined the U.S Army for two years. He was signed by the Baltimore Colts for the final four games of the 1958 season (just long enough to win a championship in that memorable season) and was traded the next year to the Packers, where he credited the legendary Vince Lombardi for shaping his football career and life. It was Thurston’s quick feet that allowed him to “pull” for running backs Paul Hornung and Jim Taylor as they executed one of the most famous plays in football lore – the “Green Bay Power Sweep.” Thurston helped the Packers win five NFL titles…