As Supervalu sales shrink, jobs are lost

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: February 7, 2012 - 11:38 PM

Corporate jobs will be cut at Supervalu, including 200 in the Twin Cities. A lot of IT work is being outsourced to India.

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A Cub Foods on Cedar Avenue in Apple Valley. Cub’s floor workers are unaffected by job cuts at parent Supervalu, but 20 office jobs with that chain will be lost.

Photo: David Joles, Star Tribune

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Supervalu Inc. said Tuesday that it will cut about 800 corporate jobs -- including about 200 in the Twin Cities -- in a move that symbolizes the struggling grocery giant's long-running battle with declining sales and market share.

The job cuts mark the second significant corporate workforce reduction during Supervalu's past two fiscal years, as it has battled intensifying competition from lower-priced competitors in an ugly economy.

The latest cuts will be in white-collar posts such as information technology, finance and merchandising at Supervalu's Eden Prairie headquarters as well as offices of its myriad chains, which include Jewel in Chicago, Acme in Philadelphia and Albertsons in Western states. Supervalu-owned Cub Foods, based in Stillwater, will have 20 jobs chopped.

In the Twin Cities, about 7 percent of Supervalu's overall corporate workforce of about 3,000 will be cut, the company said. Shop floor workers at Cub and other Supervalu chains will not be affected.

Supervalu spokesman Mike Siemienas said the workforce reductions are part of an ongoing effort of "flattening the organization" and "reducing duplication and inefficient processes."

Of the 800 job cuts, 149 will come from the outsourcing of information technology jobs. Supervalu on Monday signed a long-term agreement with Tata Consulting Services to manage various IT services, according to an internal Supervalu memo obtained by the Star Tribune.

Tata, an IT management giant in India, will do much of the Supervalu work from Guadalajara, Mexico, and Bangalore, India. Tata will also hire some U.S. employees to support the Supervalu IT services it will manage, the memo said.

The 149 IT job cuts will be spread across the country, Siemienas said.

Tuesday's job cuts come on the heels of another corporate workforce reduction at Supervalu of about 650 employees in 2010 and 2011, as Supervalu has been trying to square its cost base with falling revenue. Sales in the most recent quarter were down 4 percent from a year earlier to $8.3 billion.

In addition, Cub Foods, the Twin Cities largest supermarket chain, laid off about 200 part-time workers a year ago, while Acme, one of Supervalu's largest chains, laid off about 900 part-timers last spring.

The latest Supervalu cuts will happen through layoffs and not filling open positions. A majority of the cuts will take place by the close of Supervalu's fiscal year on Feb. 25.

"These reductions are necessary to help further strengthen and accelerate Supervalu's business turnaround in a very competitive marketplace," Supervalu Chief Executive Craig Herkert said in a news release.

Herkert has been trying to turn around Supervalu, one of the nation's largest grocery operators, since taking over as CEO in May 2009. But it has been slow going, as the company has continued to lose customers, often to discounters like SuperTarget and Wal-Mart.

Supervalu's same-store sales, a key financial metric that adjusts for newly opened stores, fell during its latest quarter for the 15th consecutive three-month period, and were worse than Wall Street expected.

Despite Herkert's turnaround efforts, Supervalu is "still ceding an unsustainable level of market share," said Ajay Jain, a stock analyst at Cantor Fitzgerald.

Exceeding cost cut goals

To help compensate for falling sales, Supervalu has been furiously cutting costs. In its current fiscal year, it is expected to exceed its original goal of $115 million in cost savings by $45 million, according to report from Barclays Capital, written before Tuesday's job cut announcement.

Cost cutting "is an area they have more control over," Jain said.

In addition, Supervalu has improved its management of promotions, which can help its bottom line with more efficient sales pricing, Jain said. And analysts say Supervalu is committed to getting its prices more in line with its competitors, a key effort to luring back customers.

Supervalu's stock closed Tuesday at $6.87, down 6 cents.

Mike Hughlett • 612-673-7003

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  • Supervalu Inc.

    Tuesday February 7, 2012

    Headquarters: Eden Prairie

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