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Supervalu completes sale of five chains to Cerberus-led investor group

BY Marianne Wilson

New York — Supervalu on Thursday announced the completion of the sale of its Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market stores and related Osco and Sav-on in-store pharmacies to AB Acquisition LLC, an affiliate of a Cerberus Capital Management-led investor consortium. The stock deal is valued at $3.3 billion, including $100 million in cash and $3.2 billion in debt assumption.

With the transaction complete, Supervalu now consists of three business units made up of Independent Business, a leading food wholesaler which serves nearly 2,000 stores across the country; Save-A-Lot, the largest hard discount grocery chain in the United States with more than 1,300 stores; and five retail banners: Cub, Farm Fresh, Shoppers, Shop ‘n Save and Hornbacher’s.

“As we move forward, Supervalu will continue as one of the largest wholesale grocery providers in America serving nearly 2,000 independent retailers in 43 states; we plan to continue growing our hard discount Save-A-Lot format that includes over 1,300 stores nationwide; and we will operate five, strong regional retail banners.” said Sam Duncan, Supervalu president and CEO.

With the close of the transaction, Robert Miller, president and CEO of Albertsons LLC, becomes Supervalu’s new non-executive chairman replacing Wayne Sales, who has served as executive chairman since August 2012. Supervalu also announced that Sales will remain on the board as a director along with four other current board members — Donald Chappel, Irwin Cohen, Philip Francis and Matthew Rubel. As previously agreed upon by Supervalu and Symphony Investors, five directors voluntarily resigned from the board effective Thursday, including Ronald Daly, Susan Engel, Edwin “Skip” Gage, Steven Rogers and Kathi Seifert.

As part of the transaction, Supervalu also announced that Symphony Investors, a Cerberus-led investor consortium, completed its tender offer resulting in the acquisition of 11.7 million shares at a purchase price of $4.00 per share in cash. In addition, pursuant to the terms of the transaction, the company issued 42.5 million new shares of common stock (approximately 19.9% of the outstanding shares) to Symphony Investors at a purchase price of $4 per share in cash to the company, or approximately $170 million. The tender offer and primary stock issuance establish Symphony Investors as Supervalu’s largest shareholder with 21.2% of total outstanding common shares.

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Survey: Importers split as to spring sales growth

BY Marianne Wilson

New York — Importers and manufacturers who sell to America’s major retailers are split as to whether they believe they will see growth and / or reductions in sales for the spring season, according to Capital Business Credit, a non-bank lender that services the retail sector.

According to the quarterly Global Retail Manufacturers and Importers Survey, 50% of importers of retail goods are experiencing an increase in orders this spring as compared to last year, while 50% are experiencing a decrease or no change from the previous year. Of those surveyed who are having a stronger spring, the majority are experiencing growth between three and 10%.

Respondents indicated that concessions and the new payroll tax are matters of concern for them in 2013. When asked if retailers are asking for more concessions this spring season, 58% of those surveyed indicated that retailers are asking for more concessions than they did in 2012.

When it comes to the payroll tax, 48% of importers worry that their business is facing a negative impact due to the increased tax in 2013. This will force retailers to continue to use sales and promotions to move merchandise which will likely cut into margins all around the sector.

"Consumers are spending less money on non-necessities due to the new payroll tax," said Andrew Tananbaum , executive chairman at CBC. "In order for retailers to get ahead in 2013, they will have to depend more heavily on discounting than they had to in the past."

While the results may seem daunting, there is a glimmer of hope. Of those surveyed, 72% are experiencing reorders for spring merchandise. Also, many manufacturers and importers are expecting retail sales for the full calendar year to be either the same or stronger than they were in 2012.

"Even though the economic factors are working against retailers – particularly those that sell apparel – importers remain cautiously optimistic about the year as a whole," said Tananbaum. "There is no crystal ball to see what the future holds, but the strength of reorders paints a positive picture."

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Ross keeps rolling with discount philosophy

BY CSA STAFF

Off price retailer Ross Stores achieved record fourth quarter sales and earnings and expects to deliver more of the same in 2013 thanks to an unwavering commitment to offering great bargains.

Sales for the 14 week fourth quarter ended February 2, increased 15% to $2.76 billion when compared to the prior year’s 13 week fourth quarter. Same store sales advanced 5% on top of a prior year gain of 7%. Earnings per share for the period increased to $1.07 from 85 cents last year and net income grew to $236.6 million from $192 million.

Michael Balmuth, Vice Chairman and Chief Executive Officer, commented,

"We are pleased with the record sales and earnings we delivered in the fourth quarter and 2012 fiscal year, especially considering they were achieved on top of strong multi-year gains," said Michael Balmuth, vice chairman and CEO. "Results for both periods benefited from our ongoing ability to deliver compelling bargains on a wide assortment of exciting name brand fashions for the family and the home to today’s value-focused consumers."

For the full 53 week fiscal year, sales increased 13% to slightly more than $9.7 billion, comps increased 6%, earnings per share grew to $3.53 from $2.86 when compared to the 52 week prior fiscal year. Net income increased to $786.8 million compared to $657.2 million.

"We plan to stay intently focused on our core off-price mission of consistently delivering great bargains to our customers," Balmuth said. "This continues to be the key to maximizing our opportunities for growth in sales and profits over both the short and the long term."

While the company’s strategy won’t change, one shift that may not sit well with some investors is the suspension of monthly sales reports. Ross said it would discontinue the practice beginning with the second quarter.

"Reporting sales quarterly aligns us with the majority of other retailers who have already adopted this practice, while also increasing the focus on longer-term performance," Balmuth said.

Ross ended the year with 1,091 stores in 33 states and 108 dd’s Discount stores in eight states.

 

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