Acme Closings To Be Precursor Of More SVU Activity
I’ve got to give new Supervalu CEO Wayne Sales credit. In five short weeks on the job, he’s already made more decisive moves that his predecessor, Craig Herkert made in three years at the helm.
Shaking up his staff was a necessary move. No offense to Janel Haugarth, but her former role as EVP-supply chain was not a great fit for her or the company. Janel’s a great team player (which will help her in her new role as EVP-business transformation), who knows the wholesale business inside out, but really wasn’t qualified to be Supervalu’s primary merchandising and procurement executive. If you don’t believe me, ask Supervalu’s key suppliers and brokers and they’ll reaffirm that the merchandising position at Supervalu needed upgrading. However, to be fair, improving SVU’s merchandising and vendor relations would have been difficult for anyone given the company’s financial results over the past several years. New EVP-merchandising Tim Lowe, whose most recent job at Supervalu was as president of Shoppers Food & Pharmacy, will also face a sharp learning curve, but his diverse retail experience should be a plus. In fact, working for anybody other than Herkert should be regarded as a positive.
And as for Kevin Holt being named president of Supervalu’s entire retail operation, I think that also sends a strong signal of empowerment. Of course, in my book, virtually any choice to head retail ops would be an improvement over the recently departed Pete Van Helden, who despite his gregarious and outgoing manner (as viewed by the associates), didn’t seem to accomplish much in his tenure at Supervalu. Holt has a huge task in front of him, but his field experience with a winning organization (Meijer, Inc.) and a losing one (Sears/Kmart) should have at least left him adequately battle tested.
As for the recent round of store closings (the first under Sales’ watch), this move should be regarded as basic housekeeping. There’ll be more painful news to come over the next year.
Sales really has no choice. Herkert and his predecessor Jeff Noddle damaged the company so severely that closing stores and selling divisions (if not all of Supervalu) is the former tire salesman’s best going forward strategy.
And while Save-A-Lot and Jewel appear to be the most saleable assets (along with several of the original Supervalu regional chains), the rest of the retailer/wholesaler’s other properties are going to be more difficult to sell.
Certainly Acme fits into that latter category. When the Malvern, PA based unit closes its stores in Falls Township, PA, Glassboro, NJ, Sharon Hill, PA and Stevensville, MD, it will shutter four units that are too small and that have underperformed for years. But what about the remainder of Acme’s 113 stores? How many others are too small or too antiquated? How many units have been affected in recent years by more progressive and sharper priced competitors? How many of those 113 stores are adversely impacted by indifferent or declining associate morale?
The answer is well over 50 percent. And when you toss in very costly legacy labor contracts and major underfundings with several of its pension plans (a huge potential liability problem for virtually all organized retailers), Acme, like Shaw’s in New England and Albertsons in Southern California, seems like a candidate more likely to be auctioned off in small pieces rather than to be sold as one entire entity.
And, now that the Supervalu prospectus is on the street, it could be possible for a deal to be done as early as the end of October. Even though I believe the best bet is that the company will be sold piecemeal, I keep hearing that private equity is all over this opportunity. (Could Cerberus – a logical fit since they acquired the Florida and Texas divisions of Albertsons in 2006 – be one of those financial players?) In that scenario, a PE firm would look to buy the entire Supervalu organization, spin off certain assets, possibly keeping control of a few profitable entities while retaining Supervalu’s valuable real estate portolio.
Stay tuned, things sound like they’re moving rapidly.