Super Valu Inc. faces a number of challenges. Among these challenges, there are a handful that merit front-burner managerial attention. Their lack of profit last quarter is not one of them, as it was a one-time charge as mandated by accounting standards. However, SuperValu is faced with declining same store sales (SuperValu Inc. Q3 Fiscal 2009 10-Q). In 2008, same store sales began to decline in the face of overall economic weakness. The state of the economy has reduced consumer spending, even on grocery items. This has led to a reduction in same store sales, which threatens the company's operating margins.
Another potential contributing factor for the decline in same store sales is increased competition, most notably from Wal-Mart, which continues to gain share in the U.S. grocery market at the expense of traditional grocers (Blattberg et al., 2007). As grocery sales slump, such competition is expected to intensify. In order to maintain same store sales and market share, SuperValu needs to address the issues of increased competition and the slumping economy.
Internally, SuperValu has a pressing issue with regards to their financial position. In 2007, expansion led to a significant increase in leverage (MSN MoneyCentral, 2009). While this expansion has resulted in increased market share and other operational benefits, including a dramatic increase in gross margin, it also increased the company's leverage significantly. In the long run, for SuperValu to remain competitive, it needs to bring its debt levels back into equilibrium. Reducing the company's debt load is therefore another front-burner issue.
Works Cited
Ratios and financial statements from MSN MoneyCentral. Retrieved February 2, 2009 at http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=U.S.:SVU&lstStatement=Balance&stmtView=Ann
SuperValu Inc. 10-Q, 3rd quarter fiscal 2009. Retrieved February 2, 2009 at http://investor.supervalu.com/phoenix.zhtml?c=93272&p=irol-newsArticle&ID=1241276&highlight=
Blattberg, Robert C.; Hansen, Karsten & Singh, Vishal P. (2007). Wal-Mart Supercenter vs. The Traditional Supermarket. Kellogg Insight. Retrieved February 2, 2009 at http://insight.kellogg.northwestern.edu/index.php/Kellogg/article/wal_mart_supercenter_versus_the_traditional_supermarket
