Shares of beleaguered supermarket chain, Supervalu Inc. (NYSE: SVU) rallied on Tuesday after the Company said it will cut 1,100 or 3% of its workforce nationwide as it looks to trim its store network.
The decision to slash the workforce comes just few days after the Company sold five of its grocery chain, which included Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market, to an investment group led by Cerberus Capital Management in deal estimated at $100 million.
Back in January, Supervalu had said that after the sale of these grocery chains it would focus more on Save-A-Lot discount chains along with some other regional chains such as farm Fresh, Shop’ n save, Shoppers, Cub and Hornbacher’s. The Company also said that it will keep its wholesale business, a division which distributes groceries to stores.
Following the sale of five groceries chains, the Company now operates 1,331 Save-A-Lot discount groceries, 1,950 stores serviced by its wholesale distribution business and 191 regional groceries which include, Cub, Farm Fresh, Shoppers, Shop ‘n Save and Hornbacher’s chains.
The company said that whittled-down store network considerably lowered the need for corporate and stores support functions and roles.
The workforce reduction, “affects nearly all company offices and crosses most departments,” said Minneapolis-based Supervalu in a statement.
However, few exceptions include store-level workers and Save-A-Lot employee, the Company said, adding that elimination date will vary from chain to chain.
“The decision to reduce our workforce, although difficult because of the impacts to our people, is the necessary next step in the rebuilding of our business,” said Supervalu Chief Executive Sam Duncan in a statement.
For years, the supermarket chain has reeled under pressure, struggling to turnaround its business. Amid intensifying competition from discount retail giants such as Target Corp, Wall Mart Store Inc and dollar chains like Dollar General, Family Dollar etc, Supervalu kept losing its traction.
Whereas bigger rival such as Kroger Co overhauled its store format, product offerings and resorted to aggressive discount programs, Supervalu struggled to keep up with the pace of changing dynamics.
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