July 30 (Bloomberg) -- Supervalu Inc., the supermarket chain that said earlier this month it will review strategic alternatives, named board member Wayne C. Sales chief executive officer to replace Craig Herkert
Sales, 62, who was CEO of Canadian Tire Corp., has been a Supervalu director since 2006 and nonexecutive chairman since 2010, the Eden Prairie, Minnesota-based company said today in a statement.
Supervalu has been eliminating jobs and accelerating price reductions to keep pace with discounters such as Wal-Mart Stores Inc. and Target Corp. On July 11, Supervalu said it was conducting a strategic review of alternatives for the business and suspended its dividend.
Herkert “clearly inherited a very bad situation and was not able to turn things around” during his three years at the helm, Ajay Jain, an analyst at Cantor Fitzgerald LP in New York, said in an interview. “There’s probably more urgency to pursue strategic alternatives and that includes a potential for asset sales,” said Jain, who recommends buying the shares
Supervalu rose 13 percent to $2.24 at the close in New York, the biggest gain since April 10. The shares have tumbled 72 percent this year.
Supervalu’s valuation is 3.8 times earnings before interest, tax, depreciation and amortization, or Ebitda, making it the cheapest among its peers, prompting investors and analysts to view it as a potential acquisition target. The average valuation for its peers is 8.4, according to data compiled by Bloomberg.
“They’re losing share,” Jain said. “I think that at the right price everything is up for sale right now.”
Sales at Supervalu have declined for the past three years as the company faces increasing competition from mass retailers and dollar stores. Sales dropped 3.8 percent to $36.1 billion in the year ended Feb. 25 and may fall 4.2 percent in the company’s fiscal 2013, according to data compiled by Bloomberg.
“The board decided that this change would be important to the company’s efforts to improve our sales and earnings trajectory and generate long-term shareholder value,” Mike Siemienas, a company spokesman, said in an interview today. The company’s strategic review is continuing, he said.
Sales, who has more than 35 years of retail-executive experience, plans to retire from his board positions at Discovery Air Inc. and Georgia Gulf Corp., according to the statement. He’s also a director at Tim Hortons Inc.
“Many of our customers and investors have lost confidence and patience,” Sales said in a e-mail today to Supervalu’s 130,000 employees. “We are doing many things that are not business critical, are of low value or are not focused on driving sales or profitability. Tough decisions will be made to change this reality.”
Sales also said that Supervalu will boost its Save-A-Lot business. The grocer’s more than 1,300 discount Save-A-Lot stores sell food for as much as 40 percent less than traditional supermarkets, according to the company’s website.
Supervalu is the largest U.S. grocery chain after Kroger Co. and Safeway Inc.
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