Supervalu Inc.'s struggles to shore up its grocery operations, including Twin Cities market leader Cub Foods and its Save-A-Lot discount unit, are being hurt by competition and price deflation, executives said Thursday.
The Eden Prairie-based firm became the latest major grocery company to warn that its performance in the summer months would be below expectations. Executives cut their outlook for the rest of the company's financial year, which ends in April.
Supervalu shares fell 9.5 percent to the lowest level since the day in July when it reported results for its previous quarter.
Several larger grocery operations, including Wal-Mart Stores Inc., have also warned investors about pressure on profits. Abrupt, sometimes steep declines in food prices this year have hurt the notoriously thin margins in the grocery business. Egg prices since the spring have hovered at their lowest levels in a decade. Beef and pork prices are also sharply lower than a year ago.
But Supervalu also said its grocery unit "has been impacted to a greater than anticipated degree by competitive openings," though it wasn't specific and a company spokesman declined to elaborate.
Cub, the largest of the grocery chains that Supervalu operates, has come under pressure from Iowa-based Hy-Vee Food Stores, which has opened several locations in the metro area this year, some directly across the street from Cub. The Twin Cities has also seen new store openings from chains as varied as Fresh Thyme and Aldi.
In a discussion with investors at a Goldman Sachs-sponsored conference later Thursday, Supervalu CEO Mark Gross did not mention the competitiveness of the company's home market. But he said, "I would also admit in our conventional retail there are places where we need to just operate better."
Gross said firms like Wal-Mart and Aldi were also cutting prices more sharply, though he stopped short of saying they were engaging in a price war.
