Supervalu puts Shop ’n Save on auction block
Amid pressure from activist investors and its continuing focus on its wholesale ops, Supervalu is putting another of its grocery brands on the selling block.
The grocery wholesaler and retailer announced it is pursuing the sale of its corporately owned and operated Shop ’n Save banner, whose two divisions operate stores in St. Louis, West Virginia, Maryland, Pennsylvania and Virginia. The company recently announced plans to sell its Farm Fresh banner. (After the sales, Supervalu’s retail banners will include Cub Foods, Hornbacher’s and Shoppers.
Supervalu also said it is selling eight of its distribution centers. The centers, which together account for some 5.8 million sq. ft., are being sold to an undisclosed buyer for approximately $483 million. Supervalu will enter into lease-back agreements for each of the centers after the sale. (In October, activist shareholders, including Blackwells Capital, urged Supervalu to unlock the value of its owned real estate.)
The announcements came as the company reported that its revenue jumped 42% in the fourth quarter, to $3.59 billion. The increase largely credited to Supervalu’s acquisitions of Unified Grocers in California and Associated Grocers of Florida.
Supervalu’s wholesale segment revenue rose 60% to $2.87 billion. Retail segment sales fell 0.6% to $694 million. In fiscal 2018, wholesale accounted for 78% of total sales.
“Already in the first two months of fiscal 2019, we’ve capitalized on our business momentum by taking several decisive, strategic actions that further our transformation,” said president and CEO Mark Gross. “These include exiting our Farm Fresh banner, the announcement that we’re pursuing the sale of our Shop ‘n Save and Shop ‘n Save East retail operations, and the monetization of approximately $483 million in owned real estate. With a growing wholesale business and more stable group of retail stores, we believe Supervalu is well positioned for success. While we still have more work to do, we remain optimistic about our ability to grow our core wholesale business and create long-term shareholder value.”
With the planned sale of Shop ’n Save, Supervalu’s retail banners will include Cub Foods, Hornbacher’s and Shoppers.
In the fourth quarter, Supervalu reported net earnings including non-controlling interests of $33 million, including $25 million of net earnings from continuing operations and $8 million of income from discontinued operations, net of tax. Diluted net earnings per share attributed to Supervalu were 86 cents, which was better than analysts had expected.
Chicagoland moving up in Red Nose rankings, Walgreens reports
In support of the fourth annual Red Nose Day in the U.S., Walgreens on Wednesday released the latest rankings for its Every One Counts Hometown Challenge, which still shows Atlanta as the top market for overall Red Nose Day fundraising activity.
But Chicago is closing in on Atlanta’s top spot in the Every One Counts ranking based on the latest data for the week ended April 16.
The challenge features 10 U.S. markets – deemed Walgreens ‘Red Rally Markets’ for their integral role in helping to rally their communities to help end child poverty – going nose-to-nose in a challenge to raise the most money for the Red Nose Day cause during the eight-week campaign.
Following Red Nose Day, which takes place May 24 with a special night of programming on NBC, Walgreens will announce the winner of the challenge with a formal proclamation to the victorious city, designated as “Red Nose Day Hometown Hero” for the next 12 months.
The Hometown Challenge Progress Report for week of April 16 is:
- Los Angeles;
- Newark, N.J./New York City; and
The weekly rankings are compiled using store-level data for combined Red Nose Day sales (Red Noses and Red Nose Day related merchandise) across Walgreens store locations in designated Red Rally markets. Data for the progress report is analyzed at a geographic market level to measure total store performance of Red Nose Day sales.
Denver: Retailers court Hispanic, millennial shoppers
Two major demographic shifts are happening in Colorado. One is a surging Hispanic population, and the other is the emergence of millennials, who in 2015 became the largest generational group, surpassing baby boomers, resulting in nearly 40% of residents being under the age of 18 years old.
These factors are affecting the retail marketplace throughout the state and especially in Denver, the biggest city.
“The ethnic operators, including Hispanic formats, continue to grow methodically,” Douglas Munson, principal at MTN Retail Advisors, said. “With KKR making a huge investment in the Hispanic sector, and with the purchase/merger of Mi Pueblo and Cardenas, look for a greater investment in markets like Denver.”
But that investment will be in a rapidly evolving market. Hispanic grocery stores will likely consolidate as they have in the natural food channel. One Latino grocery chain, Rancho Liborio, closed the last of its Colorado stores in May 2017. Azteca Ranch Market filed for bankruptcy and Avanza Supermarkets recently was sold.
King Soopers, a subsidiary of retail giant Kroger, is the leader in Denver’s mass market channel with a 29.1% share, per ARM Insight. Safeway trails in grocery at 10.2%. Mass retailers and clubs collectively dominate with nearly half of the mass market business. That includes Walmart at 26.8%; Target at 9%; Costco at 8.2%; and Sam’s Club at 4.7%.
Meanwhile, there isn’t a competitive situation in the drug store channel. ARM Insight reported that Walgreens controls the business with an 86% market share. Rite Aid and CVS Pharmacy are behind at 10% and 4.0% respectively.
Whether it’s the drug or grocery channel, winning retailers are adapting their product mix, promotions and services to appeal to the market demographics that are growing — a health-and-wellness focus for millennials and Latino food and beverages for Hispanic shoppers.
“Adding bilingual signage and packaging will make shopping easier for non-English speaking customers, and will increase brand loyalty,” Ken Morris, principal at Boston Retail Partners, said. “Retailers are also expanding product offerings to appeal to various ethnic interests, including specialty food items, makeup with broader skin tones, broader clothing sizes and styles, etc.”
Lari Harding, vice president of product strategy and marketing at Inmar, cautioned retailers that first-generation immigrants are particularly sensitive to the relationship between pricing and assortment. For example, such items as mangos and papayas are typically considered by U.S. retailers to be specialty items and are priced as such. Shoppers who view these as everyday items will expect to see the products in stores and priced in kind.
“This combination of assortment and pricing can be very difficult and expensive for traditional chain retailers to manage at the store level, she said. But if retailers can identify and invest in making the right SKUs affordable, then they can make real progress in appealing to immigrant populations.”
That’s what King Soopers is doing, but its playbook also includes catering to the growing number of millennials, which is the demographic group that favors online grocery shopping and delivery more than others. The Kroger subsidiary is speeding up its delivery of online-ordered groceries to a two-hour window via Instacart, a third-party service. The moved followed the entry of AmazonFresh grocery delivery service in Denver.
The grocer also is building urban stores in Denver, as more millennials prefer an urban lifestyle. King Soopers also operates in-store pharmacies in 13 Denver stores.
“Metro Denver’s retail scene appears to be struggling, but King Soopers is the grocery store to watch,” Todd Huseby, lead partner in the pharmacy sector practice for global consultancy A.T. Kearney, said.