business news in context, analysis with attitude

The Wall Street Journal reports that “for the fourth quarter, Supervalu reported a loss of $424 million, or $2 a share, from a year-earlier profit of $95 million, or 44 cents a share. Excluding goodwill and work-force reduction charges and other items, earnings were 38 cents a share,” which was better than the 35 cents per share predicted by analysts.

Revenue decreased five percent to $8.23 billion.

The Journal story quotes CEO Craig Herkert as saying that Supervalu is entering the second year of its business transformation effort. "It involves removing price as a barrier to customers shopping in our stores," he said. "Our long-term strategy is to bring pricing in line with our primary conventional competitors and narrow the gap to discounters." But doing so will cause identical-store sales to fall in the short term, Herkert emphasized.

And the Associated Press quotes Herkert this way: “Our disciplined approach to pre-funding price investments is allowing us to invest across markets, categories and items. We remain focused on delivering improved value for our customers and meeting the specific needs of each community we serve.”
KC's View:
Other than the enormous flood of emails I’ve gotten in recent weeks from past and current Supervalu employees saying that the morale there is in the toilet, there is something else that makes me a little skeptical about Supervalu’s future.

The Journal story says that “Supervalu has been trying to cut costs so that it can afford to lower prices on its shelves, hoping to steal customers from rivals like Kroger Co. and Safeway Inc. In February, it said it would eliminate 800 office jobs. Supervalu has also been remodeling stores to focus more on fresh produce and a local feel, putting it in a better position to compete with organic grocers like Whole Foods Market. This year, it plans to remodel 100 more.”

Can it really do both? I’m just note sure.

One other thing.

I know I’m not the most sophisticated guy about such things, but if I went home and told Mrs. Content Guy that revenues were down and instead of making a profit I’d had a loss, I’m not sure she’d buy it if I added, “But I’m gaining traction.”

Sort of reminds me of the old joke that my dad told me when I was a kid about the airline pilot who gets on the intercom and announces to the passengers, “I have good news and bad news. The bad news is that we’re lost. The good news is that w’re making good time.”