Supervalu to focus on 'right-sizing' going forward

When Supervalu announced this past summer a review of strategic alternatives, its goals were to improve its business, better position the company for the future and create the best opportunity to deliver shareholder value. This effort has led to the sale of 877 stores to AB Acquistion.

Following the sale, Supervalu will consist of its wholesaler business, which serves 1,950 stores across the country; Save-A-Lot with approximately 1,300 stores across 35 states; and Supervalu's regional retail food banners Cub, Farm Fresh, Shoppers, Shop 'n Save and Hornbacher's.

The new Supervalu will be a $17 billion business comprised mostly of its distribution business (47% of revenues), Save-A-Lot (25%) and 191 regional supermarkets (28%). According to DSN estimates, the chain will generate about $381 million in annual pharmacy sales.

"We had viewed Jewel [which was sold] and Save-A-Lot [which was not] as the most attractive banners. While not deleveraging, the transaction will remove some of the weakest banners, including Shaw's/Star Market and Albertsons," stated Citi Research analyst Deborah Weinswig in a recent research note.

At the helm of the newly formed Supervalu is former OfficeMax chief Sam Duncan. Duncan, who has more than 40 years of retail experience, served as president and CEO of ShopKo Stores prior to joining OfficeMax. He succeeds Wayne Sales, who served as the company's president and CEO since July 2012.