Sales Begins Revampment With 60 Store Closings, New Management Structure

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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.”