--Mr. Sales replaces CEO Craig Herkert, who took over in 2009

--Spokesman says it was board's decision for Mr. Herkert to step down

--Shares rise 3% to $2.05 in recent trading Monday

 
   By Annie Gasparro

Struggling supermarket operator Supervalu Inc. (SVU) dismissed Chief Executive Craig R. Herkert, naming Chairman Wayne C. Sales to succeed him as the company wants to speed up the execution of its turnaround strategy.

Supervalu, based in Eden Prairie, Minn., has struggled to pay off debt and lower its prices to win customers from rivals. After reporting a first-quarter loss earlier this month, Supervalu said it is considering selling all or part of the company. Mr. Sales will continue to lead that process as well.

"After careful deliberation, the board decided that this change in the CEO role would be important to the company's efforts to improve our sales and earnings trajectory and generate long-term shareholder value," Supervalu spokesman Mike Siemienas said during an interview.

Supervalu shares rose 3% to $2.05 in recent trading Monday, but the stock is down roughly 75% so far this year.

Supervalu, with brands such as Albertsons, Jewel-Osco and Shaw's, continues seeing declines in customer traffic and sales, as the company said it has lost market share to lower-priced competitors, including Kroger Co. (KR) and Safeway Inc. (SWY). Despite efforts to turn around business the past year, Supervalu disclosed earlier this month that its first-quarter earnings fell 45% and that it would suspend its quarterly dividend. As a result, the company lost nearly half of its value in one day.

"I have been disappointed with our results. I am well aware of what our critics have said about us. You are all familiar with our continued decline in sales, profitability and share value," Mr. Sales said in a letter to Supervalu associates. But he said his experience leading other retailers, such as Canadian Tire Corp. (CDNAF, CTC.A.T), through "fierce" competition and a "high-cost structure" shows he has got what it takes to turn Supervalu around.

Supervalu is sticking with Mr. Herkert's strategy to lower prices, cut costs internally and expand its discount chain, Save-A-Lot, which has been performing better than its traditional supermarkets. But the board and investors simply thought it was taking too long.

"As I step into my new role, I am focused on accelerating our progress in [these] areas," Mr. Sales added in the letter.

Mr. Herkert inherited a challenging scenario when he took over as CEO of Supervalu from Jeff Noddle in May 2009. He joined from Wal-Mart Stores Inc. (WMT), where he most recently had served as president and CEO of its Americas business. His earlier experience includes 23 years with Albertsons and American Stores.

Bringing his Wal-Mart mentality to Supervalu, Mr. Herkert unveiled his turnaround plan in fall 2010, but Supervalu continued to post identical-store sales declines each quarter.

Mr. Sales, 62, has been a Supervalu director since 2006 and non-executive chairman since 2010. He was president and CEO of Canadian Tire Corp. from 2000 to 2006.

J.P. Morgan analyst Ken Goldman said though Mr. Sales has "significant retail experience, he has never previously headed a food retailer." The key change with Mr. Sales taking over "will be better execution and faster implementations of those price investments and cost cutting," Mr. Goldman said in an analyst note.

BMO Capital Markets analyst Karen Short expects Mr. Sales will focus more on differentiating Supervalu's brand than on becoming more aggressive with price reductions so as to avoid a price war with Kroger and Safeway. She added that Supervalu "has become so irrelevant with the consumer that recapturing permanent share will be impossible."

 
  --Tess Stynes contributed to this article.

Write to Annie Gasparro at annie.gasparro@dowjones.com.

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