Supervalu Right to Pump Up Save-A-Lot

(MoneyWatch)  Supervalu plans to double its number of discount Save-A-Lot stores to 2,400 units across the country, in a move that is likely to attract an increasingly thrifty consumer looking for good deals. The company is in a five-year plan to complete the rollout.

My BNET Retail colleague Mike Duff recently lauded Save-A-Lot for being the "supermarket of the future." And this future-looking move by its parent company could ensure that it holds on to this status.

Part of this strategy is to place Save-A-Lot stores in regions where Supervalu operates other, more traditional chains that might own a larger market share. For example, Jewel-Osco makes up the majority of its Chicago area units. Shaw's is a strong New England chain. Albertsons is well known to many West Coast residents.

Traditional geographic placement of these brands isn't going to dictate where Supervalu opens a new store any more, said Craig Heckert, the company's president and chief executive officer, during its second-quarter conference call. "For example," he said. "Certain customers may find that our hard discount offering , Save-A-Lot, to be more relevant in compelling offerings than Jewel-Osco, in which case we will seek sites that allow us to meet needs of those neighborhoods."

This makes sense because Supervalu already operates a nationwide discount brand that it can plug into existing markets where it only has traditional stores. What's the alternative? An Albertsons outlet?

Plus, the expansion of a discount-friendly concept could probably help Supervalu in a time of slumping sales. The grocer reported a same-store sales drop of 4.8 percent year over year during its second quarter, and net earnings fell to $74 million from $128 million in the same year-ago period.

Supervalu doesn't break out sales data for its individual chains as part of its financial data, but it only makes sense that Save-A-Lot would be its best performer in a down economy. And Aldi, a growing competitor of Jewel's in Chicago is seeing 10 percent same-store sales increases year over year in that area, according to an Aldi executive.

Supervalu is right to expand Save-A-Lot's footprint. Executives just better hope that other deep-discount grocers like Aldi don't where they want to be first.