Acme Markets owner Supervalu Inc. is suspending its dividend and reviewing strategic alternatives. At the same time, the company cautioned the announcement might not lead to major changes.
Supervalu also owns the faster-growing Save-A-Lot chain of smaller grocery stores that serve urban and suburban neighborhoods. Those stores have been more profitable for SuperValu although margins slipped in the most recent quarter.
The announcement came as the Minneapolis-area company posted first quarter sales of $10.6 billion and earnings of only $41 million.
“While our shift to a fair price plus promotion strategy is right for our business, it is essential that we move even more aggressively to lower prices, and anticipate and respond to competitor actions. We expect our business transformation to meet our customers’ demands for great quality at lower prices,” said Craig Herkert, CEO.
“We intend to do this while remaining profitable, continuing to pay down debt and investing the capital to maintain and enhance our stores and related assets. Accordingly, we will be pursuing deeper and more structural cost savings initiatives. Also, we are adopting more flexible financing facilities, reducing our near-term capital expenditures and suspending our dividend.”
Acme has been facing stiff competition as it closes stores in smaller towns on the edges of its sales territory that runs from New Jersey to the Eastern Shore of Maryland. In northern Delaware, Shoprite, has emerged as a formidable competitor. The company has struggled for years with stores acquired from Albertston’s, which owned Acme.
Acme has responded with a program aimed at meeting the pricing of competitors that also include Walmart and Target.
The company’s board and management, in conjunction with its financial advisors, Goldman Sachs and Greenhill & Co., have initiated a review of strategic alternatives to create value for the Company’s shareholders. The company said the review might not make major changes.
