Exiting Corporate Retail? Revamped Shoppers’ Unit In Alexandria, VA Should Make Supervalu Reconsider
I can’t blame current Supervalu chief executive Mark Gross for strongly considering dumping many or all of the company’s more than 225 corporately-owned supermarkets.
On paper, Gross’ challenges are obvious: improve sales and earnings, help jump-start SVU’s sagging stock price ($22.61 per share as of August 10 after the recent 1-for-7 reverse stock split), improve the morale of the associates (which had declined precipitously under the horrid regimes of past CEOs Jeff Noddle and Craig Herkert) and focus on the wholesaler/retailer’s priorities.
In his 18-month tenure, Gross has failed to significantly improve the Eden Prairie, MN firm’s sales and earnings, but has made important changes designed to make Supervalu a stronger organization for the long-term. The sale of its Save-A-Lot discount unit earlier this year to Canadian private equity firm Onex was a major first step toward unloading parts of the SVU catalogue that don’t fit well with Gross’ future vision.
With a background in wholesale (he was CFO, general counsel and co-president of C&S from 1997-2006), the 54-year old New England native has focused on improving Supervalu’s distribution business and has been aggressive in that regard, snagging new customers such as The Fresh Market, Marsh (unfortunately now defunct) and America’s Food Basket, and also made a key strategic addition with the company’s recent acquisition of Unified Grocers.
Also remaining in the portfolio is corporate retail, Supervalu’s very own red-headed stepchild. Neglected for the past decade by Messrs. Noddle and Herkert, Gross inherited a woeful situation. Banners such as Farm Fresh, Cub, Shop ‘n Save (St. Louis) and Shoppers once thrived as regional chains with their own distinct personalities which commanded strong local customer loyalty. With almost no capital investment since 2006, all the corporate stores have lost significant share and continue to post huge ID sales losses each quarter (negative 4.9 percent in SVU’s recently completed first quarter). It’s no wonder that Gross has strongly hinted that most of the company’s corporate units are available for purchase (including a reported sales prospectus for Farm Fresh).
But I would suggest that Mr. Gross at least partially rethink that possible outcome. To wit: the newly remodeled Shoppers Food & Pharmacy unit that was unveiled last month in the Potomac Yard in Alexandria, VA under a new moniker Shoppers Market. Shoppers was actually the first food retailer to open in that massive development 20 years ago, but like many other Supervalu retail units, saw new competition arise (in this case, Harris Teeter and Giant Food) and offered little in terms of market defense.
The original 75,000 SF footprint has been downsized slightly, but the store has been totally reinvented. New features include chef crafted meals; a Caribou coffee shop; an expanded selection of craft, local and seasonal beers; a cake decorator station; and a full-service seafood case and full-service butcher shop case. Shoppers has also added a local grocery delivery service.
The multi-million revampment turned out beautifully. And while Alexandria is a great market to test the waters for a 2017-versioned supermarket featuring solid retail pricing and upscale perishables-driven offerings, the Bowie, MD-based operator could convert at least another half-dozen stores with similar demographics that would not only bolster Shoppers’ business (as well as the morale of the associates), it could once again provide a viable pathway for new Supervalu growth.
Yes, I know food retailing today is ultra-competitive, margins remain compressed and with some SVU corporate banners, there’s little hope for a turnaround. Mark Gross should not put Shoppers in that category.
With a little nurturing (and some real cap-ex funding), Shoppers could once again feel the mojo it enjoyed not too long ago.