When the SVU Board of Directors hired Craig Herkert it was common knowledge that SUPERVALU was failing due to two main issues caused by poor management decisions. The first was the high prices in their stores and even after years of cost cutting measures, layoffs, no bonuses, lower raises and sending a lot of jobs to India, the prices were never touched. The second was the high debt adding to the cost of doing business. So what does Craig do, he comes in with the idea of limiting the selections of products in the stores, he would say things like why do we need three brands of ketchup? To him the ideal store footprint was the Save-A-Lot store which in many ways is nothing more than a large convenience store. So he goes on a mad dash to open as many of these that he can, while ignoring the existing stores and their pricing issues, as well as the debt hanging over the head of the company. Also he continued to lay off people from the stores and the offices and cut benefits in order to reduce costs.
I did not graduate from a business school, but to me the correct thing to do would have been to look at the prices and what can be done there to drive an increase of sales and to stop the bleeding of the customers from our existing stores. I would not have been opening new stores adding to the debt before getting the debt under control.
The easiest thing a CEO can do is to cut expenses, Craig did cut expenses in the cost of employees, but you can only remove so much expense before it becomes impossible to provide service to your customers and he went over that line. At the same time he increased expenses by hiring company after company to tell them how to run the company. Often times spending millions and then sending that consulting company off and not following what they were told would help. Well all of this finally caught up with Craig, during the shareholders meeting, many investors wanted him fired, some asked him to take a wage of a dollar or two a year while he turned the company around, he stood up there and said no. The next day the board of directors grant a pay to stay incentive bonus to all the executives, which matures at a rapid rate and became fully matured if their employment was terminated. Where they in the same meeting I was? Investors started to file mismanagement legal cases against the board of directors and the executives, which two days later caused them to let Craig go.
In comes Wayne Sales, some work is done on the pricing, more layoffs are performed and more are foretold. A total lack of reasonable levels of management exists and has even grown inside of SUPERVALU. The main focus is on selling the company and not on how to turn a company around. Employees are told there will be no raises, free coffee, tea and hot chocolate are removed from the break rooms and there will be no matching deposits into the 401K program. Wayne sat on the sideline while a Goldman Sach works on the sale. He started his CEO position on the 30th of July 2012; he ended it Sunday 3rd of February 2013 with his replacement starting 4th of February 2013. He received over 12.8 million in compensation for that time frame, that is over 2 million a month from a company that has been struggling to survive, how is that even reasonable, how can a board of directors allow that kind of compensation. As an investor it makes me sick, as an employee it makes me so mad that all the hard work we do is not recognized and the list of CEOS at SUPERVALU who ran the company into the ground and Albertsons who had the same type of mismanagement all of them were greatly rewarded and for what? Killing two great companies and sending thousands of jobs overseas where they have not a single customer. Do you think maybe that is what is wrong with the American Economy, CEO greed, moving good paying jobs to a country where we do little business and then they have the balls to say where are all our customers, well you fired them, you sent their jobs elsewhere, duh.
I want to thank you for your post. It was informative, insightful, honest, and without all the hateful vitriol that one usually encounters here when there is criticism of the company.
Somehow, I feel that the Hans Christian Anderson story of "The Emperor's New Clothes is particularly fitting to our situation here. Now, who's going to be that brave child to point out that the emperor is naked?
I agree with your assessment of the management. On the other hand, Wayne Sales and most of the board will be gone (thank God), so SVU should be reevaluated based on its future.
Please note that SVU's stock price has been trading at about $3.9 for many days. What does that indicate? Is there a big seller or buyer with a preset price?
Ok, read the new filing since Sales' compensation was reduced after he was replaced as CEO a few days ago.
But Sales brokered a deal that is saving the company and its shareholders.
I read the 8K it is important to recognize a few things about the 8K and the Amendment for Sales. One is he is not currently resigned from the company and so parts of his income are still in force and not taken at the time of his replacement as the CEO. He is still working for SUPERVALU through the takeover transition. The last sentence of the 8K statement for Sales states that SUPERVALU can change the agreement again to make it more beneficial to Sales. I guess we will have to wait until the 22nd of March to see the total compensation. Don't forget about the pay to stay agreement.
So in your statement above "But Sales brokered a deal that is saving the company and its shareholders" appears to say that he earned all the money in the first place. If it was so beneficial to the shareholders, how come there are multiple law suits that have been filed since the agreement came out on behalf of shareholders against the Board of Directors for not acting in good faith for the shareholders?
You also need to remember Wayne Sales was a big reason Craig Herkert was hired in the first place and he signed off on every plan Craig made where the company went from poor performing to almost bankrupt. What kept the company from filing bankruptcy was the fact that in the Albertsons purchase they ended up with a lot of property that is wholly owned or with long term leases that allows them to do whatever they want with the property which has a value greater than the debt.