Save-A-Lot files IPO, to spin off from Supervalu

Supervalu announced earlier this month that its discount grocer Save-A-Lot filed an IPO and plans to spin off into a publicly traded company to be largely controlled by Supervalu shareholders.

According to Supervalu CEO Sam Duncan, after the separation "Supervalu will be able to focus on providing wholesale distribution services to independent retail customers and operating its five regionally based traditional format grocery banners. Save-A-Lot will continue to be a leader in hard discount grocery retailing in the United States."

According to the prospectus, Save-A-Lot would trade on the New York Stock Exchange. The prospectus also said that Save-A-Lot plans to open about 90 stores per year in 2016 and 2017, and to maintain mid-to-high single digit rates of annual new store growth in future years.

According to Save-A-Lot, the limited assortment grocery channel represents approximately 3 percent of the overall U.S. market and is projected for growth of 8 percent over the next five years.

Save-A-Lot planning for corporate store growth

In a May conference call with analysts, Supervalu President and CEO Sam Duncan said the company's goal is to open up to 100 new Save-A-Lot locations this year, including about 60 corporate stores. Beginning in 2018, Duncan projects 150 Save-A-Lot openings per year and anticipates the same 60-40 corporate - licensee mix.

"Supervalu wants to be in control of the Save-A-Lot store openings," according to Chuck Cerankosky, an analyst at Northcoast Research in Cleveland. "They are making sure the customer walks into a well-stocked, clean store that features a more appealing fresh-product assortment than it might have two or three years ago."

Save-A-Lot stores are typically about 16,000 SF, or about one third the size (or even less) of a traditional supermarket.

Supervalu experiencing growth, ready to take on Aldi

Last week Supervalu announced that all three business segments - wholesale, Save-A-Lot and traditional food retail - grew in the company's fiscal third quarter. Overall, the company had $4.2 billion in sales, a 4.8% increase over the same quarter last year. Net earnings were $79 million.

Supervalu's wholesale business plans for growth in the near future with new accounts, and the company expects to add 65 new Save-A-Lot stores in 2015.

Supervalu also made news last week when CEO Sam Duncan said his company competes very well with Aldi and "will gladly take them on any time, any place."

Regarding Aldi's acquisition of Bottom Dollar, Duncan pointed out that a lot of the Bottom Dollar stores are paying high rents. "We were looking at some of those locations before Bottom Dollar, and we established our rate that we would pay," said Duncan. "And then, they came in above us and paid some very high prices. So, we'll see how that all unfolds."

Perishables driving sales growth for Save-A-Lot

Supervalu reported last month that a focus on perishables is responsible for sales growth at Save-A-Lot, whose fiscal second quarter sales increased 8% (to $1 billion) from the same quarter last year. Overall sales at Supervalu totaled $4 billion, a 1.8% increase.

Supervalu CEO Sam Duncan also reported that identical stores sales at Save-A-Lot improved by 6.5% and corporate stores within that network saw 8.2% identical store sales increases.

The company is investing in Save-A-Lot private label brands and plans to update the packaging of about 1,000 SKUs by the end of the fiscal year. 65 new Save-A-Lot stores are expected to open in 2015.

Save-A-Lot posts solid third quarter as sales continue to rise

Supervalu announced last week that Save-A-Lot continued to see improved results in the company's fiscal third quarter.

• Identical-store sales at corporately-owned Save-A-Lot stores rose 5.4%, lifting overall identical-store sales to a 1.7% gain.
• Operating income rose 48% to $27 million, which the company largely attributed to cost reductions made earlier in the year.
• Overall sales increased 2.6% to $991 million.

Supervalu CEO Sam Duncan credited the results to the rollout of Save-A-Lot's fresh cut meat program, a renewed focus on produce, and the greater level of confidence the licensees have in the Save-A-Lot team.

For Supervalu's conventional retail food stores and for the wholesale division, sales were down for the quarter. The company's net income from continuing operations in the quarter totaled $32 million, compared to a $15 million loss one year ago.

Supervalu to decentralize banners, focus on Save-A-Lot pricing

CEO Sam Duncan said this week that Supervalu's focus would be on decentralizing its retail banners, pricing at Save-A-Lot, and recharging its wholesale business. His comments came as the company announced its fiscal fourth quarter earnings, which were significantly affected by the costs associated with the recent sale of five banners to a group led by Cerberus Capital Management.

For the quarter, Supervalu lost $1.4 billion, but Wall Street seemed optimistic about the company, as the stock jumped about 10% after the announcement and has held its gains as of Friday afternoon.

Supervalu gives $23 million to four departing execs

According to documents filed with the SEC, Supervalu is giving $22.78 million in "golden parachutes" to four executives, including CEO Wayne Sales. Sales will receive $12.8 million, about two thirds of which will be in cash.

Sales replaced Craig Herkert as CEO last July, and is expected to leave the company when the $3.3 billion deal with a group led by Cerberus Capital closes at the end of March. The deal will result in the sale of five Supervalu brands, including Albertsons and Acme.

Documents also revealed that new CEO Sam Duncan will receive an annual salary of $1.5 million along with a signing bonus of $500,000. He is also eligible for bonuses and stock options.

Cerberus to invest in Supervalu, install new leadership

Only a couple weeks after a group led by Cerberus Capital Management agreed to buy five Supervalu grocery chains for $3.3 billion, an investment group led by Cerberus is scheduled to take control of 20-30% of Supervalu and install a new executive leadership group.

According to Neil Stern, a senior partner at McMillanDoolittle, it's a good deal for Supervalu "because it makes it a more viable company in the long run (by turning) the clock back to where it was in 2006, before the Albertsons acquisition, and it will now be clearer how the company is performing."

Once the deal is done, Supervalu will continue to:

• Operate as a wholesale distributor;
• Own or license the Save-A-Lot chain;
• Own the 184 stores operating as Cub Foods, Shoppers Food & Pharmacy, Farm Fresh, Shop 'n Save and Hornbacher's.

In addition, Sam Duncan will become Supervalu's president and chief executive officer. He has previously served in similar capacities at OfficeMax, ShopKo Stores, Fred Meyer and Ralphs Grocery Co.

According to analysts, Supervalu will have to develop a new organizational structure, cut costs, turn Save-A-Lot around and devise a long-term financial plan for the company.

Many believe the company's success will be driven by Save-A-Lot, as traditional grocery stores have more limited growth prospects.

Related story: Supervalu sells Acme and four other brands; Kimco in on the deal

Supervalu sells Acme and four other brands; Kimco in on the deal

Supervalu announced this morning it has a deal in place to sell Acme and four other supermarket chains for $3.3 billion to a group led by Cerberus Capital. The Cerberus group includes Kimco, the largest shopping center owner in the U.S., and Lubert-Adler Partners of Philadelphia, among others. Albertsons, Jewel-Osco, Shaw's and Star Market stores will be sold along with Acme.

Save-A-Lot, which has several stores in the Philadelphia region, will remain with Supervalu, along with Cub Foods, Farm Fresh, Shoppers, Shop 'n Save and Hornbachers. The company's food distribution business will also remain as part of Supervalu.

The Cerberus group is paying $100 million in cash and will assume approximately $3.2 billion in debt. It will also offer to purchase 30% of what remains of Supervalu for $4 per share. As of 12 noon today, Supervalu's stock was listed at $3.34 per share.

Wayne Sales, who was named Supervalu CEO last July, will be replaced by former OfficeMax CEO Sam Duncan.

The deal, which is projected to close by the end of the first quarter, includes 877 stores. Cerberus currently owns the Albertsons stores operated by Albertsons LLC, and once the deal closes they will own all Albertsons stores.

Acme, once the dominant grocer in the Philadelphia region and still one of the area's largest employers, has over 13,000 local workers at more than 100 supermarkets. Joe DiStefano of the Philadelphia Inquirer points out in his blog post today that Lubert Adler purchased Mervyn's department store in the late 2000s, then shut down the chain after paying itself millions in dividends. Although a court ordered them to repay the chain's creditors, the firm still profited from the deal.