Dive Brief:
- Supervalu plans to seek buyers for its Shop N’ Save stores, according to a company announcement that was part of its latest earnings report. The Shop N’ Save banner includes two divisions — one that operates stores in the St. Louis area; and another that operates in Maryland, West Virginia, Pennsylvania and Virginia. The move follows last month’s announcement that Supervalu would exit its Farm Fresh banner amid continuing struggles within its retail division and mounting pressure from activist investor Blackwells Capital to sell off assets and improve its balance sheet.
- The retailer/wholesaler also reported it reached a $483 million leaseback sales agreement with an undisclosed buyer for eight of its distribution warehouses. Three of the warehouses are located in Illinois, two in California, and one each in Wisconsin, Pennsylvania and Florida. They total 5.8 million square feet. The leaseback term is 20 years, with options for renewal after that period.
- For its earnings, Supervalu reported net sales of $3.59 billion for the fourth quarter — a 42% increase over the previous period, due primarily to its acquisitions of Unified Grocers and Associated Grocers of Florida. Profit for the quarter was $25 million, up slightly from the $24 million reported a year ago.
Dive Insight:
Back in October, Blackwells Capital called on Supervalu to “unlock the value” of its real estate assets, particularly among its struggling retail divisions. Since then, the retailer/wholesaler has made leaseback sales on underperforming stores and sold off the majority of its Farm Fresh locations. Now, it’s shedding yet another banner along with a significant chunk of warehouse space.
The moves will help Supervalu pay down its $2.5 billion debt and improve its balance sheet. But will they be enough to satisfy Blackwells? The firm was thoroughly unimpressed with the Farm Fresh divestiture, calling it an “incremental step.” It then launched a proxy fight against Supervalu, nominating six industry veterans for the company’s board of directors elections this summer.
The slate of nominees includes two former retail executives, including Rick Anicetti, who resigned as CEO of The Fresh Market last year for undisclosed reasons, and Frank Lazaran, who has more than 40 years of experience in the retail industry.
Blackwells’ response notwithstanding, Supervalu has desperately needed to take action to improve its stock price, which has plummeted more than 80% over the past three years. The company has shifted its focus to the more stable wholesaling business as it has sold off retail assets, including nearly 1,400 Save-A-Lot stores to Canadian private equity firm Onex Corp. for $1.4 billion. But it still controls a significant number of retail stores in competitive markets.
On the plus side, those remaining retail stores saw comp sales rise finally in this latest quarter — albeit very little, at just .1% — indicating the company is successfully paring down to its top performers. But significant challenges still loom. In the Twin Cities, Cub Foods is under fire from Hy-Vee, Target and other competitors that are chipping away at the brand’s leading market share. Supervalu has remodeled some stores with a focus on fresh and prepared foods, but so far these have struggled to boost the bottom line.
The real beneficiaries of Supervalu’s retail sell-off may be other retailers. According to the St. Louis Business Journal, Schnucks may be interested in buying some or all of the 36 Shop N’ Save locations in that city. Kroger and Food Lion, meanwhile, have been beneficiaries of the Farm Fresh sell-off, and other retailers will no doubt be circling Shop N’ Save’s stores in the hotly contested Mid-Atlantic region.
