SUPERVALU Inc. Earnings Call Nuggets: Pace of Price Investments, The Economy

On Tuesday, SUPERVALU Inc. (NYSE:SVU) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with investors on the call.

Pace of Price Investments

Ken Goldman – JPMorgan: Could you update us a little bit, Craig. Is there a philosophical change on the pacing of price investments and I know in the past you had talked a little bit about taking it slowly. It sounds like the way you went about it the past couple of months of produces is a lot quicker than what you normally did and may be the way you are talking is about doing it a little more quickly going forward as well. If you could just update us on that a little bit that will be helpful?

Craig R. Herkert – CEO and President: No, there is no change in philosophy. We have always intended to be as aggressive as we can, knowing that we need to fund the price investments before we do them. So, we are happy with the progress the team has made in the last fiscal year and we look forward to making more progress going forward, but it is not a change in strategy, we are committed to funding these investments before we make them.

The Economy

Meredith Adler – Barclays Capital: I guess, I actually want to follow up on that a little bit. I guess, I did hear a slight change in how you might be thinking about making those price investments, it sounded like you wanted to be more sort of focused market-by-market and then at the same time to emphasize the great locations in the convenience. Is that right – is that are you going to think about region being more important than categories or items?

Craig R. Herkert – CEO and President: It’s both. We are, in fact, going to be holistic in our price investments and our value transformations. Things like what we did last year where we invested significantly in produce across the enterprise. We will continue to see elements of where we do things across the enterprise and we will see elements where we focus on a market, but it is in fact the holistic view as we go through this transformation.

Meredith Adler – Barclays Capital: May be you could just talk a little bit more you commented that customer perception of (freshness) had gone up which I presume is tied to a lot of the strength pools that you put in place, especially for produce. I was wondering whether you got any feedback yet about pricing in the produce department or you feel like it’s just too early to get people to comment on it.

Craig R. Herkert – CEO and President: Well, there’s two ways I’d answer that. One is that we do measure our rigorously and regularly our price gaps and we know for a fact that we have the intended result on narrowing the price gaps or changing the price gaps. So, that’s the fact is that we continue to maintain and watch that extraordinarily good news. We have not seen that customers have seen a measurable image change with this. It is important to bear in mind it is only 10% of the store. The good news is as I highlighted in the call we are seeing the change in behavior which is exactly what we had hoped to see and I think that change in behavior is in fact part of why the freshness has gone up. It is of course due to some of the tools that we put in place. But I think Meredith it is important to note that because we got fair pricing we are able to turn our fresh produce products on a regular basis much more frequently and not simply sell so much of that when they are on sales. So, it’s had the intended very positive impact of improving our freshness along with the fact that our produce managers have really embraced the new tools to order differently and to assort their stores appropriate for the neighborhood and for the time of day and things like that.

Meredith Adler – Barclays Capital: I’m sorry I’ll just ask one more question about the economy. You operated in some densely populated probably relatively affluent areas. Do you anticipate that an improving economy will be beneficial to you and maybe you should comment on gap prices and what that might be?

Craig R. Herkert – CEO and President: We are operating with the assumption that the economy remains sort of in a place that it is. So our goals on value transformation will continue regardless of what happens in the economy. Our focus on hyperlocal continues to regardless of what happens to the economy. The good news is, with our hyperlocal focus, our stores have much more authority today to assort and to promote their store appropriate for what is happening in their community, because as you highlighted depending on where the store is, the community might have a very different view on what’s going on economically. I think we’re well positioned this year, to make sure our stores are appropriate for their community. On gas prices, I think it’s just part of the overall mix. Certainly we know that it is a concern for consumers and it’s just another reason why we need to make sure that our value transformation happens at an appropriate pace.