Supervalue FY 3Q16 Earnings Call Notes

Sam Duncan

Trying to figure out how do we make deflation work for us

“Nothing out of the ordinary is changing, meaning the deflation and that’s what the issue is, but what Eric and his team is now working on is how do we make deflation work for us, and we had to go out there and be aggressive and look for deals and work with vendors to get the items that we need. Whether it be private label or national brand, we don’t care, we just got to drive business.”

We’re 10% behind where we were last year just on deflation

“If you look at where we were at approximately a year ago and where we are today, it’s a 10% swing on inflation and deflation. So that means when you open up the door, you’re 10% behind before you start, so you got to figure out ways to fight through that. We don’t know when we are going to start seeing some inflation and we keep thinking we are going to see it, but it hasn’t happened so far and we’ve thought that way for about six months now, but hopefully we will see some in the future. ”

I wish we had some inflation

“Trust me, I wish we had some inflation, because I would like to go out on a bear note, but inflation, deflation is out of my control and we’ve done a great thing in this company on how we improved the balance sheet and everything, so we’ve got the basics in place and we can just work through this issue.”

Customer count is not dramatically different

“Customer count is not all dramatically in any way, this is a deflation issue. When you’ve got pork and beef products down 20%, it’s a significant swing. Again, if we just had deflation – inflation at where it was a year ago, we would be running positive comps on Save-A-Lot, so it’s pretty simple to explain.”

My hope is the deflation stops

“My hope is and I don’t know what’s going to trigger it that or the deflation stops, hopefully it will settle down. I don’t know if it’s because of the oil prices and all of that. I have no idea of what’s causing it, but there is nothing more significant in that that’s affecting our business.”

Bruce Besanko

Have swung from historic inflation to historic deflation

“Last year’s historic level of inflation for certain proteins was driven by domestic supply issues combined with strong demand for exports. This year in-store contrast, domestic supplies have seen the largest year-over-year increase in the last 65 years while global demand has softened, which has led to the historic levels of deflation. We haven’t experienced these kinds of swings in the past 40 years.’

Most important task our teams are managing is this very significant deflation

“we continue to be impacted in both the corporate stores and through our license business with the significant deflation. The deflation grew in the third quarter relative to what we saw in the second quarter, which was higher than what we saw in the first quarter. So the most important task that our teams are managing is this very significant deflation”