Supervalu records $4 billion in Q2 sales, up 1.8%

BY Michael Johnsen

MINNEAPOLIS — Supervalu on Thursday reported second-quarter fiscal 2015 net sales of $4 billion and net earnings from continuing operations of $31 million.
"Midway through fiscal 2015, I am encouraged with the progress we have made across the business,” said president and CEO Sam Duncan. “The investments we have made at Save-A-Lot continue to drive sales and our Retail Food stores recorded their third consecutive quarter of positive identical store sales. The addition of the Rainbow stores this past quarter is a positive for our Independent Business and we are encouraged by the early results.”
Second quarter retail food net sales were $1.1 billion, up 2.8%. Identical store sales were positive 0.4%. Retail food operating earnings in the second quarter were $20 million, or 1.8% of net sales. Last year’s retail food operating earnings were $7 million, or 0.8% of net sales. The increase in retail food operating earnings was primarily driven by the benefit of lower levels of shrink and promotional spending.
Overall, second quarter net sales were up 1.8%. Identical store sales in the Save-A-Lot network were positive 6.5%. Identical store sales for corporate stores within the Save-A-Lot network were positive 8.2%. Total sales within the independent business segment decreased 1.1%. Fees earned under the transition services agreements in the second quarter were $44 million compared to $62 million last year.
Gross profit for the second quarter was $572 million, or 14.2% of net sales. Last year’s second quarter gross profit was $576 million, or 14.6% of net sales. The decrease in gross profit rate compared to last year was primarily driven by lower fees earned under the TSA, predominantly related to the one-year transition fee earned under the TSA in fiscal 2014 of $60 million of which $18 million was recognized in the second quarter of fiscal 2014.

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Walmart cuts back U.S. supercenter growth, ups e-commerce spending

BY Marianne Wilson

Bentonville, Ark. — Walmart is planning to sharply cut back the growth of its U.S. supercenters in favor of smaller-format stores and accelerated e-commerce and digital investments. The discounter told investors at its annual analysts meeting that it plans to open 60 to 70 supercenters during its next fiscal year, down from the planned 120 this year, and 200 to 220 smaller-format stores. In all, it will add between 26 and 30 million net retail sq. ft. worldwide next year, down from an estimated 32 to 34 million sq. ft. this year, due to a moderation of large-format store growth and accelerated e-commerce investments.

The world’s largest retailer cut guidance for 2015, saying that it expected growth of 2% to 3% compared with previous estimates of 3% to 5%.

"There is no excuse for us not to be doing better," Walmart Stores CEO Doug McMillon said during the analysts meeting. McMillon, who took over the reins from Mike Duke in February, has been accelerating the company's push to redefine its role in a fast-changing retailing environment. "We recognize our situation has changed and we're responding accordingly," he said.

Walmart’s total capital spending for fiscal year 2016 (which starts Feb. 1, 2015) is projected to range between $11.6 and $12.9 billion, including approximately $1.2 to $1.5 billion for e-commerce and digital initiatives, up from some $1.0 billion this year.

“Our business and customers continue to evolve and so will the way we deploy capital,” said Walmart CFO Charles Holley.  “We will invest more heavily in e-commerce initiatives, while temporarily moderating our global physical growth, particularly larger stores. We are focused on creating an endless aisle and appealing to our customers’ changing needs.”

The chain expects to finish this year with approximately $12.5 billion in global e-commerce sales.

“Looking forward we expect an increase in global e-commerce sales of around 25% in fiscal year 2016, and we anticipate growth over the three-year period from fiscal years 2016 through 2018 to average 30% to 40%,” Holley said. “The greatest investment of capital and in operating loss for our e-commerce operations will come over the next 18 to 24 months, and then we would expect to see that investment start to moderate in fiscal 2018.”

In line with its increased online emphasis, Walmart next year will build new online fulfillment centers in Georgia and Pennsylvania, each over 1 million sq. ft. The centers will be part of the company’s next generation fulfillment network that includes dedicated online fulfillment centers, shared distribution centers and ship-from-store locations that are all tied together with its transportation networks in the country. Walmart will also add new fulfillment centers in Brazil and China.

The company expects net sales to increase by 2% to 4% next year, which translates into approximately $10 to $20 billion of net sales growth, Holley said.

“Operating expenses will grow at a rate somewhat faster than sales growth and operating income will be flat to slightly down, given our investments in technology, e-commerce and digital,” he said.

In other meeting highlights:

  • Walmart U.S. now expects to open approximately 240 small-format units in fiscal 2015 and carry over approximately 20 units into fiscal 2016.
  • The company confirmed rumors that it is rebranding Walmart Express as Neighborhood Market, which will serve as its brand for all small-format stores, regardless of square footage.
  • During fiscal year 2016, Sam’s Club will open approximately nine to 12 clubs, including relocations and expansions. Remodeling is slated for between 60 and 65 clubs.

“We are reducing the number of new club openings for next year and accelerating technology initiatives that integrate our physical locations with our digital capabilities,” said Sam’s Club president and CEO Rosalind Brewer.

  • Globally, Walmart International will continue to invest in organic growth across its markets next year. Capital expenditures are expected to range between $3.7 and $4.2 billion. New store openings in fiscal 2016 are expected to add between 10 and 13 million sq. ft.
  • The company also expects fiscal year 2016 net sales growth to range between 2% and 4%, which translates into approximately $10 to $20 billion in net sales.

In the short term, perking up sales at its U.S. Walmart business means keeping items that shoppers want in stock and speeding up checkout lines. This holiday shopping season, Walmart says it will open more cash registers than ever. It also needs to get better with its prices.

In the long term, the company is dissecting every part of its business as it continues to test and learn what works. One big change: Walmart has ended its program of tethering its small stores with its supercenters. The purpose was to use the big stores as distribution hubs to supply goods for the smaller locations. But Walmart said the model wasn't sustainable.

"I really believe our future is bright," McMillon said. "There are so many ideas percolating around."

Greg Foran, the former Walmart Asia chief who recently became head of the U.S. Walmart division, told investors that when he first started his new job he asked managers to send him three ideas for how it could improve business. He received 3,000 emails and noted that he's been taking action. One area is improving the freshness of its produce.

But the big change is how Walmart is taking a hard look at its fleet of more than 4,000 stores in the U.S.

Foran told investors that supercenters, which average about 180,000 sq. ft. and carry general merchandise, food and pharmacy items, are still important. But Walmart needs to think about how they should look.

As for its smaller stores, the company also plans to add 180 to 200 Neighborhood Markets next year, from 170 stores scheduled for this year. It's reducing growth of its smaller Walmart Express stores. It plans to open 20 stores next year, down from the expected 70 this year. Walmart Express stores are about 12,000 sq. ft., while the Neighborhood Markets average about 40,000 sq. ft.

It's also rebranding Walmart Express stores to Neighborhood Markets, while reducing its offerings in seldom-purchased items, such as shower curtains, and stocking more items that shoppers want every day, such as diapers.

The company plans to add nine to 12 Sam's Clubs in its next fiscal year, down from the planned 20 new clubs for this fiscal year.



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DSN names Issues Summit retailers


NEW YORK — Drug Store News has announced a top-notch lineup of retail executives slated to participate in the 16th annual DSN Industry Issues Summit conference, Dec. 2 at Manhattan’s historic New York Athletic Club.

This year’s panels include:

Issues Summit

  • Doug Stukenborg, Target
  • Jill Turner-Mitchael, Sam’s Club
  • Joanne Leonardi, Ahold USA
  • Robert Tompkins, Walgreens
  • Judy Sansone, CVS Health
  • Tammy DeBoer, Family Dollar
  • Dewayne Rabon, Bi-Lo Holdings
  • Bill Bergin, Rite Aid
  • Chris Skyers, Wakefern

Diabetes and Chronic Care Roundtable

  • Michael Mastromonica, Costco
  • AJ Caffentzis, Good Neighbor Pharmacy/AmerisourceBergen
  • Steve Light, Cardinal Health
  • Leon Nevers, H-E-B Pharmacy
  • Dan Miller, Rite Aid
  • Chuck Wilson, Health Mart
  • Michael Wolf, Walgreens

Health, Wellness and Technology Summit

  • John Fegan, Bi-Lo Holdings
  • Craig Norman, H-E-B
  • Robert Thompson, Rite Aid
  • Raymond McCall, Ahold USA
  • Tom Davis, CVS Health
  • Tim Weippert, Thrifty White Pharmacy
  • Mike Cantrell, Shopko
  • Brandon Worth, Walmart

In addition, DSN editor Rob Eder will host an exclusive one-on-one lunchtime discussion with special guest Raymond Kelly, former New York City Police Commissioner.

For more information, including registration and sponsorship, visit


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Which area of the industry do you think Amazon's entry would shake up the most?