Supervalu's new CEO comes from Wal-Mart

Supervalu, looking for its next leader, announced Wednesday that it found someone at a company often portrayed as the destroyer of the traditional grocery store: Wal-Mart.

Craig R. Herkert, who until Tuesday night was the president and chief executive officer of the Americas at Wal-Mart, also spent time earlier in his career at Albertson's Inc. and Acme, two banners that came under Supervalu's control in a massive acquisition deal three years ago.

Herkert, 49, replaces outgoing CEO Jeff Noddle, 62, who said in a statement that "the time is right" for retirement.

The change comes amid a tough period for the grocer, with its 2,421 locations nationwide fighting recessionary headwinds and competition from Herkert's former employer. Investors pushed the stock down 11 cents to close at $16.91 in trading on a day the Dow rose 1.21 percent, a sign that at least one observer took as concern about the departure of Noddle, a 33-year veteran of Supervalu.

"To retire at 62 is too soon," said Burt P. Flickinger III, managing director for the Strategic Resource Group. "It's absolutely critical to Supervalu as a competitor, as an employer and a company facing one of its most challenging times in its history, that Jeff Noddle stay on for at least a full year," said Flickinger, a bondholder and shareholder of Supervalu stock.

Noddle, unavailable for comment Wednesday, said in a company statement that he would stay on as executive chairman for one year. No date was set for his last day as CEO. His retirement comes at what the company considers the normal retirement age, according to its governance principles, but the company bylaws do not mandate retirement at that age.

The company recently amended its severance plan for the CEO, the chief financial officer and other executive officers of the corporation if they are notified after May 2 that they would be terminated without cause, subject to certain exclusions. The plan calls for a payment of two times the salary for the CEO, and 1.5 times the salary for the CFO and other officers, plus pro-rated bonuses, outplacement services if requested, and other benefits.

Herkert, who holds degrees from St. Francis College in Joliet, Ill., and Northern Illinois University, began his grocery career at a Jewel-Osco in Chicago, yet another banner Supervalu acquired in 2006.

At Wal-Mart, Herkert led its expansion into Canada, Puerto Rico, Brazil, Mexico and Argentina as president and CEO of the Americas. He oversaw the company's largest acquisition in Latin America earlier this year when it took control of 58 percent of Chile's largest grocer, Distribucion y Servicio D&S SA, according to Bloomberg news services.

Flickinger said Herkert's experience may help Supervalu turn around sales in southern California and the Southwest, but the recession will continue to challenge retailers. "We're only 500 days through a 1,000-day retail recession," he said.

A spokesman for Wal-Mart confirmed that Herkert handed in his resignation this week.

Herkert will earn $850,000 at Supervalu, with a cash bonus of up to three times his salary, depending on performance, the company said in a government filing. In fiscal 2010 the "target amount" for his bonus would be 150 percent of his base salary, or $1,275,000. The filing says Herkert also gets a nonqualified stock option of $2 million and a one-time restricted stock award of $5 million, which will vest over the next four years.

Supervalu vs. Wal-Mart

The deal transformed the 139-year-old Supervalu, doubling its retail outlets while making it the third largest supermarket operator in the country behind Kroger and Safeway. It had a downside, though, as Supervalu has struggled under the weight of the debt it accumulated in the deal. Its stock flirted with $50 a share in mid-2007 before sliding sharply. It traded briefly below $10 a share late last year.

The company continues to struggle against Wal-Mart, notably in the Chicago region, where Wal-Mart lacks the strong market share it enjoys in other parts of the country. There's still hope for traditional grocers: For all that Wal-Mart has accomplished as the nation's No. 1 food retailer, it struggles to win customers' love, a recent consumer survey found. A Consumer Reports' survey found that out of 59 national chains, Wal-Mart ranked 56th for popularity.

Supervalu reported $44.56 billion in sales for its most recent year ending Feb. 28, a 1.17 percent increase from $44.05 billion for the previous year.

Supervalu employs 180,000 people nationwide. It supplies 5,000 supermarkets with groceries and logistics support. Its retail arm of 13 brands includes Cub, Jewel-Osco, Acme, Albertsons, Save-A-Lot, Shaw's/Star Market and Bristol Farms.