Supervalu Trims Workforce Following Selloff - Analyst Blog
March 28 2013 - 11:46AM
Zacks
Leading grocery chain Supervalu Inc. (SVU) is
cutting its headcount by 1,100. This follows the sale of five of
its supermarkets as a part of its strategic initiatives to
streamline operations and increase efficiency across its three
lines of business.
The labor force reduction is to be spread over nearly all of the
company’s offices and department stores. While several current
positions will be eliminated, Supervalu has stated that several
open positions will not be filled up as a part of this layoff
program.
The store level and Save-A-Lot section of employees are exempt from
the current work force reduction program of the company.
Management commented that only redundant workers are to be
retrenched for a pared-down company. It expects that the move will
help Supervalu remain more focused and also maintain operational
efficiency.
As a part of broad-based strategic alternatives, Supervalu will
sell Albertson's, Jewel-Osco, Acme, Shaw's and Star Market chains,
all of which combined come to about 877 stores. These go to private
equity firm Cerberus Capital Management LP, for $3.3 billion.
Only three business units, namely, Independent Business, Save-A-Lot
and five strong regional retail banners remain with the
company.
Management commented that it wanted to streamline its operations in
order to focus on Save-A-Lot discount stores, as well as its
smaller regional chains – Cub, Farm Fresh, Shoppers, Shop 'n Save
and Hornbacher's.
Earlier this month, Supervalu reshuffled its management team.
Michael Moore, the present chief marketing officer, was replaced by
Mark Van Buskirk, from Supervalu’s rival grocery chain The
Kroger Company (KR). He has taken up the responsibility of
executive vice president of merchandising and marketing in the
company.
The restructuring also brought in two new entrants: Randy
Burdick (former chief information officer at OfficeMax
Inc. [OMX]) as executive vice president and chief
information officer, and Michele Murphy as executive vice
president, human resources and corporate communications in its
executive team.
Supervalu’s third-quarter earnings dropped below year-ago levels
and also missed estimates for the quarter. Moreover, the company
reported negative identical store sales successively for the past
four years. The trend has continued in the first half of fiscal
2013.
Now, in order to combat four successive years of negative identical
store sales and re-position the company for growth, Supervalu
intends to expand its private brand portfolio and step up
cost-reduction initiatives.
These are expected to reduce administrative and operational
expenses by an additional $250 million by fiscal 2014.
We believe that the reduction of its workforce and executive
management turnaround could prove beneficial to Supervalu’s bottom
line. The U.S. government’s decision not to furlough United States
Department of Agriculture (USDA) meat inspectors is a positive not
just for Supervalu (because it ensures continuous supply of meat
products to the grocery chain), but also for meat producers like
Sanderson Farms Inc. (SAFM).
Currently, Supervalu carries a Zacks Rank #3 (Hold).
KROGER CO (KR): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
SANDERSON FARMS (SAFM): Free Stock Analysis Report
SUPERVALU INC (SVU): Free Stock Analysis Report
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