Albertsons 2013 Annual Report Download - page 27

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT OVERVIEW
Fiscal 2013 was a year of change for the Company. The Company initiated a review of strategic alternatives in
July 2012. In the fourth quarter of fiscal 2013, the Company announced it had entered into a Stock Purchase
Agreement (the “Stock Purchase Agreement”) for the sale of its wholly owned subsidiary New Albertsons, Inc.
(“NAI”), resulting in the sale of the Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market stores and related
Osco and Sav-on in-store pharmacies (collectively, the “NAI Banners”), to AB Acquisition, LLC, (“AB
Acquisition”), an affiliate of a Cerberus Capital Management, L.P. (“Cerberus”)-led consortium which also
includes Kimco Realty, Klaff Realty LP, Lubert-Adler Partners and Schottenstein Real Estate Group (the “NAI
Banner Sale”). The NAI Banner Sale closed on March 21, 2013 marking a significant milestone for the 140-year
old company.
As a result, SUPERVALU enters fiscal 2014 as a more focused wholesale and retail grocery business having
achieved revenues of more than $17 billion in fiscal 2013 on a continuing operations basis. The Company
appointed a new leadership team, including new president and chief executive officer, Sam Duncan, and non-
executive chairman, Robert Miller. This new executive team is implementing a decentralized operating model
focused on simplifying operations and placing more authority and accountability at the retail banner and
Independent Business region level.
Going forward, the Company consists of three primary businesses: Independent Business, Save-A-Lot and Retail
Food. Independent Business, which serves as the primary supplier to nearly 1,900 of stores operated by
independent retailers, will be the Company’s largest reportable segment in terms of sales. Save-A-Lot continues
to be the Company’s market-leading hard discount format with more than 1,300 stores and considerable
opportunities for growth. With more than 900 of its stores owned and operated by independent licensees, Save-
A-Lot has a unique business proposition that includes growth opportunities for both corporate and licensee
owned locations. The Company’s Retail Food segment, although smaller following the NAI Banner Sale, has 191
established, traditional grocery stores spread across five regional banners.
The Company remains committed to growing its quality, private label products and expanding its largest brand
offering, Essential Everyday, to fuel growth. Last year, the Company introduced approximately 360 new
products across its private brand portfolio, as well as introduced Essential Everyday as the primary private brand
serving the Company’s 1,900 independent retail stores. These products help differentiate the Company from its
competition while providing important value offerings to customers. Private brands will continue to be an
emphasis for the Company in fiscal 2014.
Longer-term, the Company has plans to increase sales and operating cash flow, improve its balance sheet, and
generate returns for its stockholders.
Fiscal 2014 will be a transition year for the Company, as it transitions through the NAI Banner Sale. This
transition is expected to affect results for continuing operations as the Company implements a new decentralized
business model under the guidance of new senior management. The Company will continue to be challenged by
the slow rate of economic improvement and historically low levels of consumer confidence as it seeks to reverse
negative same store sales trends. Management expects that consumer spending will continue to be pressured by
the overall economic environment and that operating results for the Company will be impacted as consumers
continue to seek greater value offerings in a highly competitive and price-sensitive marketplace.
In connection with the Stock Purchase Agreement, the Company has entered into various agreements with regard
to on-going operations, including a Transition Services Agreement with each of NAI and Albertson’s LLC and
operating and supply agreements. The initial terms of these arrangements vary from 12 months to 5 years, are
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