Eden Prairie, Minn.-based Supervalu kicked off its fiscal 2018 with better-than-expected results for wholesale, but worrying same-store sales in retail.
The company reported profit earnings growth of 9 percent on July 25, and revenues of $4 billion during the earnings period that ended June 17. Wholesale was its big gain, up 12% compared to the first quarter of 2017, but retail same store sales were down 4.9% and customer counts down 5%.
Supervalu Inc. shares were up more than 10% following the report.
Supervalu’s working to enhance customer experience to help turn around retail, said CEO Mark Gross, during the call.
“As we work hard to improve the traffic trend and drive sales, one area of focus is meal solutions, including meal kits and grab-and-go options,” he said. “We’ve long provided meal solutions, but we’re excited with the innovation and expansion we’re rolling out in this area.”
Remodels, particularly in the company’s Cub division, are ongoing.
“We currently have several remodels in process, where we’ll be testing some new innovative merchandising initiatives,” he said. “If successful, we would plan to roll those down later this year and into fiscal 2019.”
Gross also addressed the Amazon/Whole Foods merger’s potential effect on Supervalu.
“A relatively small percentage of our stores and those of our customers have a Whole Foods store in their immediate trade area – remembering that many of our customers operate in more rural parts of the country,” he said. “However, we do see retail and our business becoming more of an omni-channel business, meaning we need to be able to meet and serve customers across several potential shopping experiences.”
Wholesale lifts
Fresh off the approval of its purchase of Unified Grocers in the Pacific Northwest, Supervalu is pleased with the growth it’s seeing in the wholesale division, Gross said.
“We’re also seeing continued success in produce, where we again saw a good year-over-year growth in total produce sales,” he said. “In fact, the week leading up to Easter was the largest single week of produce sales in the last eight years.”
Gross said Supervalu continues to evaluate areas to consolidate operations in the Northwest following the Unified incorporation.
“We collectively operate three DCs in the Pacific Northwest, with some resulting excess capacity,” he said. “We believe a different logistic solution will allow us to lower operating cost and we’re working toward finding the configuration that minimizes logistic cost and best serves our customers.”
Supervalu also saw some lower volumes due to the Marsh bankruptcy, but its effect on business was less than expected, and the company picked up new customers in the wake of the Central Grocers bankruptcy, as well.
“We expect to fully mitigate the balance of the lost Marsh volume this fiscal year with new customer wins and, to a lesser degree, stronger than anticipated sales to existing customers,” Gross said.