This document discusses strategies for the turnaround of struggling grocery chain Supervalu, including recommendations to close underperforming stores and distribution centers, reduce headcount and benefits, tighten credit, and convert owned Save-A-Lot stores to franchises. It compares Supervalu's management and financial struggles to other chains like Safeway and A&P. Forward strategies involve identifying and closing unprofitable locations while investing in others, followed by downsizing headcount and streamlining costs. Projections estimate financial improvement from cost cuts and debt refinancing.

1. Targeting Financial Stability
Hayden, Perla, Christine, and Enia

2. ON TARGET
Discussion Flow
Turnaround strategies for Supervalu
Causation of Supervalu’s Struggle
Discussion of Management and comparison to Safeway and
A&P Grocers
Forward Strategies
Forward Projections of Recovery
Q&A

3. ON TARGET
Recommendations for
SUPERVALU SURVIVAL

4. ON TARGET
Recommendations:
• Close 35% of stores nationwide to increase cash
on hand and lower SG&A costs
• Reduce overall headcount by 30-40% nationwide
• Close all international locations (Caribbean)
• Eliminate 6-9 distribution centers outside core
geographical areas
• Reduce employee benefits and pension
contributions
• Convert existing Save-A-Lot’s owned by
Supervalu into franchise locations or close them
• Tighten Credit to independent grocery customers

5. ON TARGET
CAUSATION OF SUPERVALU’S STRUGGLE

6. ON TARGET
Why is Supervalu Struggling?
• Heavy SG&A costs weighing • Large debt assumed after
down financial performance purchasing Albertson’s
• Ineffective management of • Did not close underperforming
current operations stores in a timely manner
• Failed attempt to break into • Sluggish distribution network
the “hard discount” segment
• Too many chains within the
• Distribution network is not Supervalu network
focused on supplying just
Supervalu stores

7. ON TARGET
SG&A Costs have been a
major driver of the
operational decline of
Supervalu. The
acquisition of Albertson’s
occurred in 2Q 2006,
which is reflected in FYE
2007 financials.

8. ON TARGET
Supervalu’s SG&A Expenses have historically been
higher than their peer group…
• Supervalu’s supply chain is regionally heavy but
nationally thinner than competitors
• Distribution centers (the life blood grocers)
supply Supervalu and independent stores –
causing more inefficiency and more lag time.

9. ON TARGET
The company is
lagging in collecting
from credit sales to
vendors which is being
demonstrated through
a high DSO score and
low Receivables
Turnover score.
Supervalu’s
distribution system
from the Albertson’s
deal is inefficient and
must be reorganized
and streamlined in
order to be profitable.

10. ON TARGET
DISCUSSION OF MANAGEMENT AND COMPARISON TO
SAFEWAY AND A&P GROCERS

11. ON TARGET
SUPERVALU's CESO
Jeff Noddle
CEO from June 2001-June 2009
• Led Albertson’s Acquisition in 2006
Craig Herket
CEO from May 2009- July 2012
• Wal-Mart’s “Everyday low
Prices” mentality
• Save A-Lot expansion
Wayne Sales
CEO from July 2012- Present
• Turn around CEO

12. ON TARGET Employee Benefits and Pension Plans:
Reduce the benefits by 25-30% by Benefits:
fiscal year ended 2017: • Medical Insurance
• 130,000 Employees • Dental Insurance
• 84,000 insured • Life Insurance
• Competitive 401k
• Tuition Reimbursement
• Vacation and Holidays
Other Changes:
• Employees to share more of the
cost of health insurance due to
uncertainty with healthcare reform
• Mandate direct deposit for all
employees – more efficient
• No tuition reimbursement for the
next 2-3 years

13. ON TARGET
Stores and Distribution Centers:
• 5,000 retail stores
from coast to coast
• 35 Production
distribution centers
• Close distribution centers
(Idaho, Montana, Utah,
etc.) – Low store count
• Close low performance
stores across the country

14. ON TARGET Safeway Comparison to Supervalu:
• Safeway and A&P are similar because they accumulated
a lot of debt just as Supervalu did when they acquired
Albertsons in 2006.
• In the 1980’s Safeway was taken private by Kohlberg
Kravis Roberts (KKR) and assumed tremendous debt.
• The company chose to close 1,132 stores (over half of
the 2,200 store nationwide) to regain profitability during
this period.
• Safeway sold all locations outside of the United States
and Canada to simplify operations.
• Today, Safeway runs over 1,700 stores in the United
States and Canada and is more efficiently operating
compared to the 1980’s.

15. ON TARGET A&P Comparison to Supervalu
• A&P experienced financial difficulties in the 1970’s due to:
• Lack of Capital
• Higher labor costs compared to competitors
• Inefficient use of resources
• In February 1975 A&P planned to close 36% stores of A&P’s
3,468 stores.
• By 1977 weekly store sales increased from $37,000 to over
$70,000.
• Total sales increasing from $6.4 billion to $7.2 billion
despite the many closures.
• However, in 2007, A&P acquired Pathmark for $1.4 Billion
thus substantially increasing the debt load just like the
2006 Albertson’s acquisition.
• A&P Filed for bankruptcy in December 2010.

16. ON TARGET
FORWARD STRATEGIES

17. ON TARGET The Plan:
Identify – Locate
underperforming stores
Invest – Once profitable start Stage 1 and distributions centers
investing into current store
Identify for immediate closure (3-6
and distribution locations to
months)
maximize returns per square
foot.
Stage 4 Stage 2
Invest Downsize
Stage 3 Downsize – Close selected
stores and cut the
Reduce appropriate headcount to
Reduce – Streamline cost reduce costs
centers and optimize
distribution channels for
more financial synergies

18. ON TARGET
FORWARD PROJECTIONS OF RECOVERY

19. ON TARGET
Projected Financial Impact on Supervalu
Projected financial improvement based on cost cutting assumptions and
low/moderate growth in the regions in which the stores operate. In addition,
the team inserted the assumption that current financial partners would
refinance an estimated 33% of current or close to current debt obligations.

20. Q&A
ON TARGET