OPINIONRetailers

Craig Herkert's Return Engagement at Save A Lot

Interim CEO takes over as chain approaches growth mode
Video capture: Save A Lot

Basket Economics

In a quiet move continuing a cascade of Executive Plinko in the food-discount field, Supervalu’s former CEO, Craig Herkert, has been named interim CEO at Save A Lot.

The CEO role at the St. Louis discounter became officially vacant when Kenneth McGrath returned to Save A Lot's German rival Lidl Oct. 1 as that company's deputy chairman, becoming the top lieutenant of Lidl’s freshly installed CEO, Gerd Chrzanowski. Chrzanowski took over this summer after the abrupt departure of longtime leader Klaus Gehrig and shortly thereafter sent for McGrath, who prior to leading Save A Lot had helmed Lidl's U.S. debut.

Herkert in effect is also making a return engagement.

Between 2009 and 2012, Herkert led wholesaler Supervalu—then also the parent of Save A Lot along with the American Stores retail banners (Acme, Shaw’s, Albertsons and Jewel among them).

His tenure, coinciding with a deep recession and high debts, was a difficult one for Supervalu, which under Herkert's watch engaged in aggressive cost reductions and teed up the process that resulted in the sale of its conventional retail banners back to a reorganized Albertsons Cos. shortly after he departed (these had been acquired by Herkert’s Supervalu predecessor, Jeff Noddle, from Albertsons Inc. shortly before Herkert started in his role). Save A Lot was also eventually spun off.

Save A Lot grew by 200 new stores under Herkert’s watch to a chain of around 1,400, although its growth fell about 1,000 stores short of a long-term vision to double the banner's 1,200-store footprint expressed shortly after he began there. 

He finds Save A Lot today a smaller company (about 1,000 stores) but arguably one on firmer footing. It is nearing the end of a process of relicensing its owned stores to independent operators, a big store renovation program is underway, and an energetic new branding campaign is taking that message to shoppers. With these elements in place and the discount opportunity still looking bright, perhaps we'll see Herkert revisiting that double-the-footprint vision.

Herkert, who has been a board member, lecturer and consultant in recent years, before joining Supervalu spent nearly 10 years at Walmart, leading its international divisions in various high-profile posts. He was a longtime Albertsons Inc. leader before that, with roles including EVP of marketing and president of Acme over a 23-year span with the company.

Big Gains for UNFI

Year-to-date, no grocery stock has been hotter than that of the wholesaler United Natural Foods Inc., which on the strength of a recent optimistic forecast was up more than 210%.

The Providence, R.I.-based company reported its fourth-quarter and fiscal-year sales last month and set fiscal 2022 guidance that, according to analyst Bill Kirk of MKM Partners, was ahead of most expectations for UNFI in fiscal 2024. The forecast indicates that a three-year strategic plan laid out in July (net sales gains of 3% to 5%; adjusted EBITDA of 6% to 10% and EPS growth of 12% to 18%) had a solid start.

Also notable in the fourth-quarter figures was a 12% gain in UNFI’s sales to Whole Foods Market, it largest single customer. That doesn’t necessarily mean that Whole Foods’ retail sales are growing at the same pace but rather that it was buying more of what it sells from UNFI—presumably, the kinds of conventional foods that UNFI gained control of through the Supervalu merger and the “cross-selling” opportunities that brought the wholesaler.

I'll Buy That for a Dollar

Succumbing to the seemingly inevitable, Dollar Tree Inc. said it would end the practice of resolutely sticking to single $1 price points at its legacy Dollar Tree stores by “testing” retails of $1.25 and $1.50 on certain merchandise.

This change comes as the chain also puts new muscle into the “Dollar Tree Plus!” and combination-store initiatives that are expanding variety at select stores by adding selections of $3 and $5 merchandise and sharing co-branded storefronts with its Family Dollar sister, respectively.

Each of these three separate strategic moves acknowledge at some level that conditions—particularly since the pandemic—have exposed vulnerabilities in the single-price-point offering upon which Dollar Tree built its identity—and further enmeshes the format with Family Dollar, a more direct competitor to its high-flying rival Dollar General, which has continued to bleed into the discount grocery space. Dollar Tree imports close to 40% of its merchandise; fast-rising shipping and material costs are obviously pressuring profits.

combo storeDollar Tree officials see the potential for 3,000 "combination" stores. Photograph courtesy Dollar Tree

Dollar Tree says the dual-branded combo store, now with 105 locations in the U.S., bringing the $1 “treasure hunt” into small markets that couldn’t previously support Dollar Tree on their own, will grow by 400 new units next year with as many as 3,000 stores on the horizon. Dollar Tree Plus!—store-within-a-store departments that expand the kind of merchandise that legacy stores couldn’t previously carry but at eye-opening prices that retain the hunting-trip surprise—will number 500 by this year, 2,000 by next year, and 5,000 by 2024, officials say.

Dollar Tree has about 15,000 stores in the U.S. and Canada; slightly more than half are Family Dollar stores.

September's Top Stories

Kroger Co. reviewed mixed results in its fiscal second-quarter: Comps dipped by less than 1% despite lapping last year’s COVID-influenced sales gains—beating estimates—but profits dipped as the big retailer swallowed some inflating prices, faced higher costs for transportation and materials and saw shrink increase—partially a result of an uptick in organized retail crime that has come with other pressures facing the industry today.

A similar message about managing the strains came from Richard Galanti, CEO of Costco Wholesale, as he reviewed (largely terrific) Q4 results last month. “It’s a lot of fun right now,” Galanti remarked facetiously. “Higher labor costs, higher freight costs, higher transportation demand, along with container shortages and port delays, increased demand in certain product categories, various shortages of everything from computer chips to oils and chemicals, higher commodities prices.”

Next Up

Welcome to October. The Halloween-to-holidays sprint is upon us (Amazon’s “Epic Deals” event has already begun) and we’ll see a lot of new stores open up in coming weeks. On the financial calendar, we expect to hear from Albertsons Cos. discussing second-quarter earnings Oct. 21 and, tentatively, Amazon on Oct. 26 and Blue Apron Oct. 29.

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