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Duane Reade reports increase in same-store sales

BY Antoinette Alexander

NEW YORK Duane Reade on Wednesday posted a same-store sales increase of 1.7% as it narrowed its loss during the second quarter.

“We are encouraged by our continued solid performance despite a weak external environment and are also pleased with our 6.3% increase in adjusted FIFO EBITDA. We made significant progress on the transformed store locations. The customer response to our improved offering and store design remains exceedingly positive with an expanding level of awareness of the improvements we have made. We are encouraged by this momentum and remain committed to better serving New Yorkers as we aim to become a destination brand,” stated John Lederer, chairman and CEO.

For the quarter ended June 27, the 253-store chain posted net retail store sales, which exclude pharmacy resale activity, of $450.3 million, up 4.2% compared with the year-ago period. Total net sales rose 6.1% to $479.1 million. Total same-store sales rose 1.7%, while front-end same-store sales increased 0.2%. Pharmacy same-store sales rose 3.6%.

Net loss for the quarter was $11.6 million, compared with $12.1 million in the year-ago period.

“As we look to the second half of the year, we remain cautiously optimistic about our prospects for continued growth in our business and remain in track with our expectations for adjusted FIFO EBITDA, even as we take into account continued external challenges. We are pleased with Oak Hill’s demonstrated confidence in our transformation plans and appreciate the firm’s ongoing support as our equity partner. Further, we anticipate that our debt refinancing will be completed shortly and look forward to the benefits of operating our business with added financial flexibility as we continue to identify and pragmatically realize our opportunities for long-term growth,” stated Lederer.

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Herkert seeks to turn around Supervalu after grim first quarter

BY DSN STAFF

MINNEAPOLIS Two months into his new position, Craig Herkert, Supervalu CEO and former Walmart executive, took action on Tuesday, firmly stating that Supervalu’s current performance metrics “are not acceptable,” and setting out a multi-pronged plan designed to refocus the many-bannered supermarket chain and laying the baseline for long-term growth. “Our issue is execution,” Herkert told analysts Tuesday morning.

And execution is an issue across all facets of the business, Herkert said — customers perceive Supervalu as too high-priced, and only take advantage of the chain’s too-deep promotional items; and vendors perceive Supervalu as too complex, perhaps choosing to focus their retail allotments against easier-to-work-with competitors. “Going forward, roles and responsibilities will be clearly defined,” Herkert said, and operations executives will be held accountable.

For example, now all of the supermarkets operating under the Supervalu umbrella will now report up to Pete Van Helden, EVP of retail operations at Supervalu. “I think just getting clarity [around] reporting relationships … will increase and improve our ability to make decisions efficiently.”

As an example of that, Supervalu two weeks ago brought all of its specialty banners —bigg’s, Cub Foods, Farm Fresh, Hornbacher’s, Shop ‘n Save and Shoppers Food & Pharmacy — all under the guidance of Brian Huff, SVP specialty retail, who reports directly to Van Helden.

Also as part of that operational streamlining initiative, Supervalu sold its Utah-based Albertsons operations on the same day of the call to Associated Food Stores. The move was made because Utah was not a core market, Herkert said.

As part of Tuesday’s conference call, Herkert identified a number of areas where Supervalu will seek improvements. First, the company will be looking to funnel its focus wholly onto the consumer. And beyond actual shoppers, one of those key customers is the independent retailer supplied by Supervalu, Herkert added. Pricing perception among consumers will also be a key focus going forward.

Outside of Save-A-Lot, which operates on an everday-low-price strategy, Supervalu’s banners pursue a high-low price strategy.

“Our price position has hurt us,” Herkert said. “Particularly in this economy.”

Herkert stressed that perception will change, just not right away.

“Customer perception does not change on a dime,” he said. “What were working toward is fixing the value proposition so that our everyday prices are more meaningful to her.”

As part of scaling its high-low pricing structure a bit lower in an effort to better meet customer expectations, Supervalu will also be reviewing its promotional activity. Herkert noted that Supervalu’s current promotional activity doesn’t do anything to improve pricing perception among shoppers, nor does it improve loyalty.

And while Supervalu’s pricing position needs to be adjusted, marketing is a strength for the company, Herkert said.

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Supervalu sales, earnings decline

BY Allison Cerra

MINNEAPOLIS Supervalu reported that its net sales for the first quarter of fiscal year 2010 dropped 4.5% from the year-ago period.

The grocer said Tuesday its net earnings dropped significantly to $113 million, or $0.53 per diluted share, from $162 million, or $0.76 per diluted share, during first quarter 2009.

“As we noted in our press release of June 24, our first quarter results reflected the continuing difficult economic environment as well as investments we are making in price and higher levels of promotional spending. As a result, sales and margins in the first quarter were weaker than originally expected. We anticipate no near-term change in consumer spending patterns and we will operate our business accordingly,” said Craig Herkert, CEO at Supervalu.

First quarter retail food net sales were $9.9 billion, compared with $10.3 billion last year, a decrease of 4.3%, primarily reflecting the impact of identical store sales of negative 3.2% and previously announced store closures. The identical store sales performance primarily results from a challenging economic environment, heightened competitive activity and additional investments in price and promotions. Retail square footage decreased 3.2% from the first quarter of fiscal 2009. Excluding the impact of store closures, total retail square footage increased 0.8%, compared with the first quarter of fiscal 2009.

Click here for the full financial results.

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