Despite drop in earnings, Supervalu CEO Herkert sets sights on price strategy

MINNEAPOLIS The current economy appears to be tempering tomorrow’s shopper as a more value-oriented shopper, Craig Herkert, Supervalu CEO and president, suggested to analysts Tuesday morning during the company’s third-quarter analyst call.

“In my 30 years of retailing I’ve never seen the intense discounting” evident today, he said. But become too promotional, and a retailer risks significantly impacting operations. The price tactics that were used to drive traffic in the past “are now driving lower transaction size and margin erosion,” Herkert suggested.

Herkert’s leading two “items of importance” during the analyst call addressed this price-strategy evolution — identifying a profitable promotional strategy and pursuing a value-oriented overall pricing strategy.

The past quarter had been a tough period of difficult decisions in “striking the right balance between sales and promotional investments,” Herkert said. Supervalu succeeded in increasing its promotional mix by some 350 basis points without sacrificing margins, he said.

Supervalu also is currently pursuing more of a value-oriented, everyday low-pricing strategy, narrowing the gap between promotional pricing and nonpromotional pricing. With regard to the company’s actual EDLP banner, Save-A-Lot, Herkert reiterated plans to double that banner’s footprint in the coming year.

Closer conformance to an EDLP strategy may become a cost of entry for all retailers going forward, especially considering a recent Motorola survey. Already, 51% of consumers globally are using their mobile phones as a shopping tool while shopping.

Supervalu reported third-quarter fiscal 2010 net sales of $9.2 billion, down 9.8% compared with the year-ago period, and net earnings were down 17.4% to $109 million.

“Sales were softer than we had anticipated, but earnings per share, even before the impact from the Salt Lake City retail market exit, beat [analyst] consensus,” Herkert stated.