Despite more consumers shopping at discount food stores, the competition remains tough. Supervalu has announced it is closing 60 under-performing stores including 38 in its retail food segment and 22 Save-A-Lot locations.
The majority of the stores are expected to close before December 1, 2012, the end of the Company’s fiscal 2013 third quarter.
“These decisions are never easy because of the impact a store closure has on our team members, our customers and our communities,” said Wayne Sales, Supervalu's president, CEO, and chairman. “Today’s announcement reflects our commitment to move with a greater sense of urgency to reduce costs and improve shareholder value.”
Company expects big savings
There will be costs associated with closing the stores but the company says it expects to recoup $100 million from the sales of assets and reduced costs over the next three years. The Company owns the real estate for approximately one-third of the retail food stores being closed.
The closures in the retail food segment include 27 Albertsons stores, 19 of which are located in southern California. Eight of the other stores are in the Intermountain West region. In addition to the Albertsons and Save-A-Lot stores, Supervalu is closing four ACME stores and one previously announced Jewel-Osco location.
Eight other stores are targeted for closing but their locations have yet to be announced because of ongoing contract discussions.
Up against dollar stores
Supervalu has struggle in recent years to compete against other discount chains. In addition, dollar stores have aggressively moved into the grocery space, taking many Supervalu customers, who were already shopping at Dollar General and Family Dollar for other items.
On Wednesday, Dollar General reported a larger than expected profit and raised its forecast, based in large part on an increase in food sales. The company reported a 5.1 increase in same store sales for the just completed quarter.
Since 2009 and the onset of the recession, dollar stores have increased food offerings, undercutting discount grocers like Supervalu and, in some cases, even Walmart.