Albertsons 2004 Annual Report Download - page 3

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Also in retail during fiscal 2004, our “in-market” efforts with category management and banner branding
enhanced our excellent foothold in key markets where we continue to invest with new stores and remodels. A
few examples are:
‰Cub Foods in Minnesota improved its market share position by adding four new stores to its network.
Cub Foods plans to open four more stores in Minnesota in fiscal 2005.
‰We converted the Metro stores in Baltimore, Maryland, to Shoppers Food and Pharmacy, our strong
price impact format in Washington, D.C., which promises to extend our success to another major
market.
‰Farm Fresh in Virginia continued to grow market share through strong quality and service. In fiscal
2005, an exciting smaller store, uniquely located on the ground floor of a luxury high-rise condo
development, will further broaden Farm Fresh’s appeal to consumers.
‰Shop ’n Save in St. Louis, Missouri, continued its strong price impact merchandising programs,
including a pilot program featuring Deal$-sourced dollar store merchandise within the larger Shop ’n
Save stores.
SUPERVALU’s distribution business made significant progress in fiscal 2004. We took bold steps to
advance our strategy including focusing on aggressive asset management to carefully align productive assets to
drive solid business returns, continuing the implementation of efficiency initiatives and delivering growth in our
non-asset based business platform. Through a unique asset exchange with C&S Wholesale Grocers, Inc. to
affiliate former Fleming retailers in the Midwest, we successfully brought on and integrated new business into
our existing network. The overall square footage reduction and the complementary increase in capacity
utilization rates was a component of our overall ROIC improvement for the year.
Even though the wholesale distribution business is a mature industry, we have numerous efficiency
initiatives in place across our logistics network generating improvements in our productivity. Supporting our
nearly 3,200 customers are strong programs, founded on an activity-based pricing philosophy, which drive
competitiveness at the grocery shelf level. Whether it is warehouse efficiencies or our business-to-business portal
SVHarbor®with more than eight million customer transactions per month, we continuously leverage the
application of technology for process improvement and efficiency.
Our non-asset based logistics service business, Advantage Logistics, made progress in fiscal 2004. We
began serving two new facilities in Denver, including Atkins Nutritionals, a new manufacturing customer
specializing in controlled carbohydrate food products. Since the end of fiscal 2004, we have been awarded our
second Atkins facility. Another hybrid to the traditional brick and mortar offering is our Target-dedicated facility
in Fort Worth, Texas, which serves 49 of the 118 SuperTarget stores we currently supply. As these new business
offerings and solutions gain scale and momentum, they provide a new iteration of growth for our logistics
business over the long term.
All these business strategies across SUPERVALU work hand-in-hand to drive progress on our financial
goals. In fiscal 2004, we continued to strengthen our financial condition.
We continued our prudent capital spending program, with spending for fiscal 2004 at $371.5 million,
including $43.3 million in capitalized leases. As in previous years, our capital spending primarily supports retail
store expansion and remodels, new Save-A-Lot distribution facilities and technology enhancements.
During the year, SUPERVALU reduced debt levels by more than $220 million. As a result, our debt to
capital ratio at year end was 46.7 percent, our lowest level in more than a decade.
Subsequent to the end of the fiscal year, we sold our equity interest in a West Coast retailer named WinCo.
Our decision to sell this equity interest was to monetize an asset over which we had limited control and that
contributed no cash earnings, but had significant unrealized appreciation. We received approximately $150
million in after-tax proceeds for our interest in WinCo, which will be utilized to support further debt reduction.
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