Supervalu Inc. Q2 2010 Earnings Conference Call Summary - Thomson StreetEvents

Supervalu Inc. Q2 2010 Earnings Conference Call Summary

Supervalu Inc. Q2 2010 Earnings Conference Call Summary - Thomson StreetEvents
Supervalu Inc. Q2 2010 Earnings Conference Call Summary
Published Oct 20, 2009
26 pages (13983 words) — Published Oct 20, 2009
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Abstract:

Edited Brief of SVU earnings conference call or presentation, 20-Oct-09 9:00am CT

  
Brief Excerpt:

...David Oliver Supervalu Inc. - VP Investor Relations Craig Herkert Supervalu Inc. - CEO & President Pamela Knous Supervalu Inc. - EVP & CFO...

  
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9:00am CT
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The following is excerpted from the question-and-answer section of the transcript.

(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)

Question: Deborah Weinswig - Citigroup - Analyst: We really appreciate your vision for the Company. You laid out your vision for Save-A-Lot. Can you elaborate in terms of the unit potential for the US and is that geographically skewed at all or how should we think about that?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Deborah Weinswig - Citigroup - Analyst: Okay. Then what are you doing to drive traffic to the stores, which I think has been in positive territory at most of your competitors, what do you think the real key is there?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Deborah Weinswig - Citigroup - Analyst: Pam you eluded to, cut can you expand on what additional opportunities exist on the expense side?

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO


Question: Deborah Weinswig - Citigroup - Analyst: Thanks so much for all the color and best of luck.

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO


Question: John Heinbockel - Goldman Sachs - Analyst: Couple of things. Craig can you talk about the possible organizational structure you would like to have and sort of the challenges of this holistic approach? For example, do you need someone to own and be responsible, accountable for Chicago as a whole, as opposed to the different banners, someone to be accountable for Southern California? How do you bring that together where you get the all the different parties on the same page and someone is accountable for that market?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: John Heinbockel - Goldman Sachs - Analyst: As a follow up, do you think it will be more that the guys who run Save-A-Lot and Jewel and Wholesale sit together in strategic plan once or twice a year and then go back and run their banners or do you think there will actually be someone who has a Chicago P&L if you will or geographic P&L? Which one do you think it might be?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: John Heinbockel - Goldman Sachs - Analyst: Finally, on a more short-term basis, if I look at your guidance, it looks like the sales environment is not going to get that much different, you had negative 4% comp in the first half. Let's say negative 4% in the second. Yet, the implied EBIT margin looks to be a better performance. What's the driver of that? Is that something on the cost side mix, is there something that gives you confidence that EBIT margin will be a lot better in the back end for the year?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: John Heinbockel - Goldman Sachs - Analyst: Okay. Thank you.


Question: Meredith Adler - Barclays Capital - Analyst: Thanks for taking my question. When you talk about looking at the individual opportunities in markets and what's right for the local neighborhood, would you consider taking an existing store and converting to it a new banner or selling a store to a independent customer?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Meredith Adler - Barclays Capital - Analyst: And if -- you are obviously tying yourself closely to your wholesale customers, many of whom are very innovative and do a great job, but is there any way to actually tie them in? Because the big fear is you sell a store to an independent and then they find another wholesaler sometime down the road.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Meredith Adler - Barclays Capital - Analyst: Is Janel going to saying anything?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Meredith Adler - Barclays Capital - Analyst: My final question is about the centralization process. I have to be honest that my conversations with vendors are saying there has been some technology issues and that maybe one of the most important things is for the folks in the regions to execute whatever promotion is signed at corporate, if it's building and end capital or whatever and that there is somehow a breakdown either in the communication or whatever. So, cultural has always been a issue in terms of finding the balance between centralized and decentralized. Where do you stands on that?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Meredith Adler - Barclays Capital - Analyst: Okay, thank you.


Question: Edward Kelly - Credit Suisse - Analyst: Good morning. If I were to sit back and try to take an honest assessment of the SUPERVALU supermarket business it seems like one of the bigger challenges, and if I look at the markets where you are and you got --you're number one or number two in a lot of these regions, but your absolute share in those regions, take out Jewel for instance, sort of around the 20% range. If I was to do that for a Kroger you would see north of 30%, which to me indicates that those markets I think are still very competitive. How big of a challenge is this generally for you longer term? As I think about this strategy, it seems like there is a greater reliance on third parties, probably more than what supermarket investors are used to. What's the challenges of better leveraging an independent, for instance, if that independent is going to compete with some of your stores? Could you maybe speak to all of that?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Edward Kelly - Credit Suisse - Analyst: Then second question for you, how important with this whole strategy is price going to be from where you are today? Clearly, you have made some big price investments this year, but where does it stand in terms of how much more in terms of what needs to be done incrementally?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Edward Kelly - Credit Suisse - Analyst: Thank you.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Karen Short - BMO Capital Markets - Analyst: Hi, thanks for taking my question. I have just a couple of follow ups on the Save-A-Lot. Also other comments you made. The first question is there -- it sounds like you are going to be pushing more the franchisee model versus company-operated is that right?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Karen Short - BMO Capital Markets - Analyst: So, within the franchisee agreement is there, are there barriers to you growing your own company-operated Save-A-Lots from an overlap perspective.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Karen Short - BMO Capital Markets - Analyst: Okay. Got it. Then turning to private label. Could you give us color on what it's looking like as a percent of units now and how that's been trending? On the baskets, follow up on that. Maybe talk about the basket in terms of percent of units bought on promotions versus nonpromotion today and maybe give us time frame on how that's changed?

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Karen Short - BMO Capital Markets - Analyst: Okay. I guess last question is you had mentioned pension very briefly as it related to cost reduction opportunities, excluding pension. Can you maybe talk about what you are seeing from the multiemployer pension liability perspective? Do you have data on where that is trending and what the expense may be looking like?

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO


Question: Karen Short - BMO Capital Markets - Analyst: Then I guess the last question is just on corporate, it was a pretty low number -- the $6 million, is that a good run rate number to use going forward from now on?

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO


Question: Karen Short - BMO Capital Markets - Analyst: Thank you.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Scott Mushkin - Jefferies & Co. - Analyst: I wanted to clarify a couple of points and then ask a question. I want to make sure I heard you correctly that sales so far this quarter are actually worse than the negative 4.8%. Second thing I would like to clarify is it sounded like you said we need to make more price investments, but we are actually making less right now. Then the third clarification I would like to have is the distribution network. My understanding is that the Save-A-Lot distribution and management structure is completely separate at this stage from the rest of SUPERVALU.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Scott Mushkin - Jefferies & Co. - Analyst: Just the last two, so that you're obviously running somewhere in the negative 5%s and you said that you're not spending less you are just trying to allocate it more appropriately. Actually, you are spending more, I don't know how to square that to tell you the truth a little bit.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Scott Mushkin - Jefferies & Co. - Analyst: Okay. I will talk to David offline. Second, I guess more of a question from a shareholder perspective, a dividend cut, acceleration of growth which we have no insight into the business Save-A-Lot because it's not provided -- with the rest of the business showing deceleration still into the third quarter. How is this shareholder friendly? I guess that's a little blunt, but -- I don't get it to tell you the truth.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Scott Mushkin - Jefferies & Co. - Analyst: Not the to belabor the point a little bit, but it seems like you are spending CapEx other places. Are we down so low on CapEx other places that you couldn't allocate it from that CapEx budget over to Save-A-Lot.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Scott Mushkin - Jefferies & Co. - Analyst: Thanks. I will relinquish the floor. Thanks very much for answering my questions.


Question: Mark Wiltamuth - Morgan Stanley - Analyst: Good morning. Mark Wiltamuth from Morgan Stanley. If you look at your three buckets here supply chain, Save-A-Lot and core retail, it seems like you are asking the supply chain and the Save-A-Lot to pick up their levels of growth. How much of that 8% EBIT number is really going to be coming out of those two buckets and how much will be coming out of the core retail because it seems like the Save-A-Lot bucket is probably small in overall dollars right now?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Mark Wiltamuth - Morgan Stanley - Analyst: It's low dollars on Save-A-Lot right now. Especially because it's a franchise business model, but how much can the dollars grow in terms of EBIT growth? Is that a meaningful number given it is a franchise business?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Mark Wiltamuth - Morgan Stanley - Analyst: Okay. Then so sounds like the most of the growth really here is recovering core retail. That is still the core.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Mark Wiltamuth - Morgan Stanley - Analyst: Okay. What do you think a normalized growth rate for supply chain could be once you are done with the target transitions?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Mark Wiltamuth - Morgan Stanley - Analyst: Okay. Thank you very much.

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Neill Currie - UBS - Analyst: Afternoon, thanks for being to open and eloquent in sharing your vision for the Company. My main question centers around the core business. Obviously there are good opportunities on the supply chain side and in centralizing a lot of the functions. In terms of what the customer sees, we hear you are talking about SKU rationalization, cutting prices, more customer focus, private label focus and being the store of the community. All of those things are very valid and very important and the right thing to do, but we hear a lot of retailers talking about similar strategy, many of them are also somewhat behind in addressing some of these issues. What do you feel once we come to the end of this process -- what do you think will be the supermarket you unique selling proposition that you have over your competitors? Secondly, this considerable investment you are making -- will it be turned in to an opportunity or will this be a cost of doing business in today's environment?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Neill Currie - UBS - Analyst: I'm just wondering whether the investments are permanent cost and that you're margins are basicly going to be rebased here?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Neill Currie - UBS - Analyst: Yes, thank you. I would also like to ask, if possible, in the markets where you run big relief. Could you give us sense of what the traffic numbers are doing there and whether you have been able to stabilize the basket size?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Neill Currie - UBS - Analyst: Finally, thanks for answering all these questions. In terms of your independent customers how distressed are they right now compared to what they might have been six months ago? Is is there a risk that many of your customers could fall into some trouble over the next 6 to 8 months if we don't see any improvement in the economy?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President


Question: Neill Currie - UBS - Analyst: Great, thank you very much.


Question: Charles Grom - J.P. Morgan - Analyst: Just on the trends so far, quarter-to-date. Could you give us a sense for where that's coming from? Is it customer count, is it trade-down, is it deflation getting worse? Any sense there would be helpful.

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO


Question: Charles Grom - J.P. Morgan - Analyst: Okay. Just follow up to that. (inaudible) talked a little bit of color for us this quarter in deflation trends in some of the higher turning categories. I was just wondering if you could give us sense to what you are seeing so far this quarter?

Answer By: Craig Herkert - Supervalu Inc. - CEO & President

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO


Question: Charles Grom - J.P. Morgan - Analyst: Fair enough. Then on the last question on the 50 basis points of SG&A improvement, longer term, I guess two questions, one would be what's the timeline or duration you expect to get that savings? And then two, is the goal to reinvest that 50 bips or is it the goal to let it fall to the bottom line?

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO


Question: Charles Grom - J.P. Morgan - Analyst: Good luck, thanks.

Answer By: David Oliver - Supervalu Inc. - VP Investor Relations

Answer By: David Oliver - Supervalu Inc. - VP Investor Relations

Answer By: Craig Herkert - Supervalu Inc. - CEO & President

Answer By: Pamela Knous - Supervalu Inc. - EVP & CFO

Table Of Contents

Supervalu Inc. Q3 2010 Earnings Conference Call Summary – 2010-01-12 – US$ 54.00 – Edited Brief of SVU earnings conference call or presentation, 12-Jan-10 9:00am CT

Supervalu Inc. at Bank of America Merrill Lynch Credit Conference Transcript – 2009-12-02 – US$ 54.00 – Final Transcript of SVU presentation, 2-Dec-09 2:00pm ET

Supervalu Inc. at Morgan Stanley Global Consumer & Retail Conference Transcript – 2009-11-19 – US$ 54.00 – Final Transcript of SVU presentation, 19-Nov-09 4:30pm ET

Supervalu Inc. at Citi Credit Conference Transcript – 2009-11-18 – US$ 54.00 – Final Transcript of SVU presentation, 18-Nov-09 9:10am ET

Supervalu Inc. Q2 2010 Earnings Conference Call Transcript – 2009-10-20 – US$ 54.00 – Final Transcript of SVU earnings conference call or presentation, 20-Oct-09 9:00am CT

Supervalu Inc. at Goldman Sachs Retailing Conference Transcript – 2009-09-10 – US$ 54.00 – Final Transcript of SVU presentation, 10-Sep-09 3:00pm ET

Supervalu Inc. at CanaccordAdams Global Growth Conference Transcript – 2009-08-13 – US$ 54.00 – Final Transcript of SVU presentation, 13-Aug-09 9:00am ET

Supervalu Inc. Q1 2010 Earnings Conference Call Summary – 2009-07-28 – US$ 54.00 – Edited Brief of SVU earnings conference call or presentation, 28-Jul-09 9:00am CT

Supervalu Inc. Q1 2010 Earnings Conference Call Transcript – 2009-07-28 – US$ 54.00 – Final Transcript of SVU earnings conference call or presentation, 28-Jul-09 9:00am CT

Supervalu Inc. Annual Meeting of Stockholders Transcript – 2009-06-25 – US$ 54.00 – Final Transcript of SVU shareholder or annual meeting, 25-Jun-09 10:00am CT

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Thomson StreetEvents. "Supervalu Inc. Q2 2010 Earnings Conference Call Summary" Oct 20, 2009. Alacra Store. Sep 22, 2019. <http://www.alacrastore.com/thomson-streetevents-transcripts/Q2-2010-Supervalu-Inc-Earnings-Conference-Call-B2480238>
  
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