Cub Foods' Parent Company Fighting for Financial Foothold

Eden Prairie-based Supervalu Inc. is struggling to make a comeback—which could yield lower prices for shoppers but also result in further layoffs in the Twin Cities.

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The future of the Eden Prairie-based Supervalu Inc. is in question after the company announced that it would suspend quarterly dividends to shareholders and further cut its expenses—an effort that could result in more layoffs and store closings.

There is also talk of selling the company—either in pieces or as a whole. Locally, any major reduction could impact Burnsville's two Cub Foods stores—one of which is the of a shopping complex in the Heart of the City.

SUPERVALU INC. is one of the largest companies in Minnesota. Twin Cities Business ranked the grocer as the fourth largest publicly-held company, behind only UnitedHealth Group, Target Corporation and Best Buy in Twin Cities Business. Regionally, its flagship is the Cub Foods chain in the Twin Cities, but the company also holds other supermarket brands throughout the nation including Jewel-Osco, Save-A-Lot and Albertsons. 

At present, it encompasses approximately 4,400 stores—1,101 traditional retail stores and 1,336 hard discount stores. The company employs about 130,000 people nationwide. 

However, after the world economy fell into disarray in 2008, Supervalu's fortunes took a turn for the worse. The company is beset by competition on all sides as bargain hunters flee to cheaper alternatives—like Wal-Mart, Target or Aldi—and high-end customers opt for premium grocers like Trader Joe's or Whole Foods, according to a recent report in Bloomberg Business.

As a result, the company has not turned a net profit in three years. Supervalu's stock has also been hammered on Wall Street: Share prices have fallen 35 percent over the last 12 months. 

The company unveiled a restructuring plan on June 28. Company officials promised to cut operational expenses by over $200 million and simultaneously slash in-store prices.

“Given the economic situation the American consumer is in, a lot of grocery competitors are focused on making sure they have the right value proposition for customers,” said Supervalu Chief Executive Craig Herkert, in a report by the Star Tribune. “We needed to accelerate our ability to play in that game.”

Though bankruptcy is "not on the table," Herkert said, the company has contracted with financial advisers—Goldman Sachs and Greenhill & Co. The advisors will be tasked with coming up with a strategy to appease Supervalu's shareholders, who discovered this week that they will no longer be receiving a quarterly dividend. The solution could involve putting Supervalu itself on the market.

"This review is not something we take lightly," Herkert said in a letter to employees. "Strategic alternatives will be broad-based and include looking at the sale or other disposition of all or part of the company."

Over the last six months, Supervalu's struggles have regularly made the news. In an effort to lower the company's debt burden, Supervalu has closed stores, cut jobs, and sold some of its holdings. According to a report by the Minneapolis St. Paul Business Journal, in February Supervalu announced that it would eliminate 800 jobs from corporate and regional offices. Another round of layoffs followed in June, when the company said it planned to cut between 2,000 and 2,500 jobs at the company’s Albertsons stores in California and Nevada. Then on July 2 the company announced that it planned to eliminate 39 marketing jobs across the country. At the time, company representatives could not say how many jobs might be lost in the Twin Cities.


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