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Private Label's Role in Supervalu, A&P Turn-around Plans

October 25, 2010
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More and better private label is integral to recovery strategies being discussed by struggling retailers A&P and Supervalu on their most recent quarterly earnings conference calls.



More and better private label is integral to recovery strategies being discussed by struggling retailers A&P and Supervalu on their most recent quarterly earnings conference calls.
 
“By enhancing and expanding our private label brand identity to America’s Choice, Food Basics and the Food Emporium Trading Company, we are offering customers additional value and variety,” says Sam Martin, Great Atlantic & Pacific Tea Co. president and CEO, describing one of five key elements in a turn-around plan announced on last week’s call.
 
The economy continues “to provide a headwind,” says Supervalu President and CEO Craig Heckert. Elements of the company’s previously announced long-term strategy, he adds, include “hyper-local retailing,” store remodeling and implementing “fair pricing plus promotion.”
 
In its second quarter, Supervalu private brand sales penetration set a record 18.5 percent, says Sherry Smith, senior vice president of finance.
 
Both companies made headlines the week of Oct. 18 when below-expected performance signaled continuing struggles in the retail grocery industry.
 
Great Atlantic & Pacific, operator of the A&P supermarket chain and other stores, is the more troubled of the two companies, having reported quarterly losses for the last two years. The company reported a loss for the three-month period ending Sept. 11 nearly twice what it was a year ago.
 
Sales for the second quarter were $1.9 billion versus $2.1 billion in last fiscal year’s second quarter. Reported loss from continuing operations was $143 billion compared to last year’s second quarter reported loss of $62 million.
 
The company is cutting costs, selling assets, including reportedly its Food Emporium banner, and lowering prices as it looks for additional financing for its already considerable debt burden.
 
“By continuing to enhance and provide visibility and value for our customers through our lower price projects, we’re delivering a more relevant product assortment and more competitive pricing,” says A&P’s Martin.
 
For the quarter ending Sept. 11, Supervalu reported a loss of $1.47 billion, compared to a year-earlier profit of $74 million. Revenue dropped 8.5 percent to $8.66 billion, as same store sales fell 6.4 percent. The company projected weaker sales for the rest of fiscal 2011.
 

During the quarter, Supervalu started broader roll-out of its “fair price plus promotion” strategy meant to remove the extreme ends of its high-low pricing, says Smith. “We believe this change to our pricing architecture is significant and will help us to address the perceived value gap that had weighed on customer traffic trends in recent quarters.”

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