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New leader at Supervalu is tip of turnaround iceberg

WHAT IT MEANS AND WHY IT’S IMPORTANT — Supervalu now is in full turnaround mode, and with the naming of Wayne Sales as CEO to lead the charge, analysts are saying the Canadian retail executive who helped turn around Canadian Tire is the right man for the job. But Supervalu still has plenty of heavy lifting to do.

(THE NEWS: Supervalu names new president, CEO. For the full story, click here)

Much of Wall Street was taken aback by the news: “The speed with which Supervalu’s business unraveled in Q1 was startling, particularly after business trends appeared to be showing a bit of stability during 4Q11,” Deutsche Bank analyst Charles Grom wrote. The news only brings further to light the significant competition for that share of stomach — not only are such traditional grocers as Walmart, Kroger and Safeway significant competitors, but the rollout of broader food selections and the emphasis on fresh in the drug, convenience and dollar channels also has taken its toll.

Supervalu will continue to implement sharper pricing for its consumers, and an emphasis on its deep-discount format Save-A-Lot also will continue. Though Save-A-Lot’s fundamentals also dropped over the first quarter, the deep-discount, limited-assortment grocery format is much more economic-recovery proof with prices coming in between a 30% and 40% discount to traditional grocers. However, Save-A-Lot isn’t the only deep discounter targeting the grocery trip — dollar stores increasingly are grabbing that deep-discount ticket.

Another challenge for Supervalu is its competition, competitors who won’t hesitate to respond to any increased marketing efforts from Minneapolis. Those marketing efforts are expected to give a boost to traffic, the challenge will be keeping shoppers coming back to Supervalu’s traditional grocer banners.

What do you think? Will Wayne Sales restore Supervalu's position as a top grocer? Sound off in the comments below.

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