• by Thom Forbes  @tforbes, July 31, 2012

Supervalu may have “abruptly” axed CEO Craig Herkert yesterday, as the Minneapolis Star Tribune’s Mike Hughlett reports, but the analysts he and other journalists cite pretty much say they saw it coming. The company operates Albertsons, Jewel-Osco and other supermarkets that have been hit hard by competition from the likes of Wal-Mart, Target, Costco, dollars stores and even drugstores that are expanding their grocery aisles. 

Cantor Fitzgerald stock analyst Ajay Jain says the firing of the 52-year-old former Wal-Mart executive was "somewhat inevitable," citing its financial performance. Supervalu’s stock was trading in the $16 range when Herkert took the job in May 2009 and closed Monday at $2.24, up 25 cents. 

A roundup by Supermarket News’ Jon Springer that carries the hed “Analysts Not Surprised at Herkert Ouster” includes a somewhat demurely twisted approval of the beheading by John Heinbockel of Guggenheim Securities. “Although it is hardly ideal to make a CEO change in the midst of such a challenging turnaround effort in a difficult operating environment, we do not regard Herkert’s departure as a meaningful incremental negative.”

Whether the appointment of Wayne Sales, who has been Supervalu's non-executive chairman, to succeed Herkert is a meaningful incremental positive, though, is the question at hand.

“Challenges may prove to be insurmountable at this stage for even the most exceptional food retail executive given Supervalu’s market share losses, lack of brand equity, and lack of resonance with the customer,” says BMO Capital Markets analyst Karen Short.

Although the company also trumpeted some strategic initiatives yesterday, observers seem to feel that they’re not all that different from previously announced plans.

In a letter to employees, Sales said “the company’s biggest enemy was time,” reports the Associated Press. He “emphasized the same themes that Herkert had stressed earlier,” reports Tom Webb in the Twin Cities Pioneer Press: 

• The urgency of growing profitable sales. 
• The need to cut costs even more. 
• The need to grow the deep-discount Save-A-Lot chain. 
• The goal to build up the distribution system that serves independent grocers. 

The company has also said that it will “review its options with financial advisors” -- often a code phrase for a sale or divestiture. Sales, who is retired vice chairman and former CEO of Canadian Tire, has been leading that process, which was announced earlier this month. He will remain chairman.

“Herkert's continued presence at Supervalu ‘raised governance issues’ that could ‘deter any external interest in Supervalu's assets,’ pointed out Janney Capital Markets analyst Jonathan Feeney.

In a July 19 interview with the Star Tribune, Herkert rues not having moved faster on the company’s business plan and admitted that the board had given him a “timeline” to get it done. “But it seems to have been cut short,” Hughlett writes. Herkert also acknowledged a gaffe in reading the shopper’s mindset.

"Our promotional prices were generally wonderful," he said. "But our base prices were too high, so in too many categories we worked ourselves into a situation where consumers were being trained by us -- this is our fault -- only to buy products when they were on promotion."

The West Coast-based Albertsons was acquired in 2006 by former CEO Jeff Noddle and has been a $12 billion-or-so albatross for the Eden Prairie, Minn.-based company that had made its mark as a wholesaler. The Jewel-Osco chain was part of that deal.

“The large size of the Albertsons deal forced Supervalu to devote a significant portion of its cash to servicing debt rather than investing in its stores,” writes Reuters’ Phil Wahba.

Thom Blischok, the chief retail strategist at Booz & Company, tells the Wall Street Journal’s Annie Gasparro that today’s successful supermarkets need to focus on more than price. Indeed, they need to invest in servicing an increasingly discerning and demanding customer.

“The reality is, with the intensified competition in the grocery industry, it's imperative that retailers continue to improve the shopping experience -- that's what the competition is doing, and that's something Supervalu will have to continue to work on," he says. This includes “improving the customer-facing technology, making services at the bakery and butcher shop more personalized and stocking more local produce.”

BMO Capital’s Short expects Sales to try to differentiate Supervalu's brands rather than get into a price war with the likes of Kroger and Safeway.

The new CEO is a “former college drop out from Lynchburg, Va., [who] is credited with spearheading a big-box format at Canadian Tire when Wal-Mart pushed into the country in the mid-1990s,” writes Matt Andrejczak on MarketWatch. He got his start in retailing doing scut work at a Kmart and is known for his “gregarious personality,” according to Canadian press reports.

“He would wander off during store tours to chat up customers and examine inventory,” says Andrejczak. “He’s obsessed with details, too. Apparently he could reel off stats on shelf-widths in particular stores.”

That’s an incrementally positive talent to be sure but indicative, perhaps, of an ability to get things done.