Last updated on December 13th, 2012 at 10:54 am
by Kristen Cloud/staff writer
Supervalu on Wednesday announced a number of initiatives to make the company, as CEO and President Craig Herkert said, “more competitive and unlock value for our shareholders.” In addition for plans to aggressively lower prices in response to competitors’ actions and cut a quarter of a billion dollars in administrative and operational expenses over the next two years, Eden Prairie, Minn.-based Supervalu is looking at selling all or parts of the company.
“As we proceed with these actions in an effort to drive more traffic to our stores and ensure we are the destination of choice in the neighborhood we serve, we remain focused on maintaining our operational and financial strength,” Herkert said. “We are committed to generating operating cash flows of more than $1 billion annually and meeting or exceeding our debt reduction targets. And, to assure we are evaluating the full range of opportunities available to us to create value for shareholders, the company’s board and management, together with its financial advisors, are reviewing strategic alternatives for our business.
“These are bold but necessary moves, which will position Supervalu for success in this increasingly competitive environment,” he added.
Bankruptcy, however, is not an option, Herkert revealed during the first quarter earnings call Wednesday.
“We are a profitable company with solid cash flows of a billion dollars,” he said. “We continue to pay down our debt on or ahead of schedule. So (bankruptcy) is not a part of our strategic review.”
Coupled with the strategic review, however: the company is suspending identical store sales and earnings per share guidance and withdrawing any previous guidance given for FY 2013. It will continue to provide forward-looking information on debit reduction and capital expenditures.
Announcement comes after ‘challenging’ Q1
News of Supervalu’s plans came after it released dismal financial results for its first quarter of fiscal year 2013.
For the quarter ended June 16, the company reported net sales of $10.6 billion and net earnings of $41 million, or 19 cents per diluted share. That compares to the prior year’s Q1 net sales of $11.1 billion and net earnings of $74 million, or 35 cents per share. Cash flow from operations was $227 million compared to $245 for the same quarter a year ago.
“This was a challenging quarter for us,” said Herkert, adding that “our performance reflects the fact that we did not move quickly enough to respond to intensifying competitive conditions in our industry.”