In addition to Jeff Metzger’s monthly column “Taking Stock,” he will periodically offer his unfettered take on breaking news stories in the industry. In this opinion piece, he offers his thoughts on the beleaguered discount retailer’s hiring of ex-Supervalu CEO Craig Herkert as chief executive of the company and their questionable decision to keep former CEO McGrath on until he assumes his new role as deputy chairman of rival Lidl on October 1.
Just when we thought that discounter Save A Lot (SAL) couldn’t get any more dysfunctional, the retailer found a new way to surprise us by naming former Supervalu (SVU) chief executive Craig Herkert as its interim CEO. Yes, that Craig Herkert. He replaces Kenneth McGrath who is leaving SAL to become deputy chairman of rival Lidl on October 1. More on that later.
You could make an argument that Herkert is skilled and prepared to lead a large organization from his previous senior management positions at Albertsons and Walmart over the last 35 years. And you could even substantiate that argument by noting that Herkert was recruited by Supervalu to help turn around that troubled company (which was acquired by UNFI in 2018). At that time in May 2009, Supervalu’s portfolio also included more than 1,000 Save A Lot stores nationally.
But it was Herkert’s performance during his 39-month tenure at SVU that created the image that’s been permanently imprinted into my brain – that he was arguably the worst CEO in the grocery business over the past 25 years. And in my opinion, it wasn’t even close.
Granted, like it will be at Save A Lot, Herkert took the reins of Supervalu when it was a company that had been stumbling. In 2006, it spent $12.4 billion (including debt) to buy the majority of Albertsons in an attempt to become both a retail and wholesale force. The only problem was that the engineer of that deal and the chief executive of SVU at the time, Jeff Noddle, an excellent wholesaler, proved to be horrible at retailing. By 2009, Noddle was forced out and replaced by Herkert. On paper, it seemed like a solid fit.
However, it didn’t take long to figure out that Herkert wasn’t any kind of turnaround specialist or even effective at improving virtually any aspect of Supervalu’s business – he was a Teflon-coated, process-oriented executive whose people skills were highly limited. After Supervalu posted net losses of $1.5 billion, $1.04 billion and $1.47 billion respectively in fiscal years 2011, 2012 and 2013, he was dismissed by the board in July 2012 (about halfway through fiscal 2013). Those numbers alone would have been enough to make stockholders angry; the related stock slide from $118 per share when Herkert first joined the company to the $38.50 per share price when he left also made them ill.
For the past several years Herkert has been working as an industry advisor and, according to his LinkedIn page, as a “performance coach” for an organization called the Pioneering Collective which touts itself as existing “at the intersection of personal PR, transformational coaching, and powerful networking to transform your hard-earned wisdom into heavyweight impact – personally, professionally and culturally.” Huh? I wasn’t kidding about the Teflon coating.
To make things even stranger, multiple sources have told me that Kenneth McGrath is still in the building at Save A Lot’s corporate headquarters in St. Ann, MO, reportedly to assist with the transition. Huh again!
When McGrath announced he was resigning from SAL on July 27 and within hours it was revealed that he would be join limited assortment competitor Lidl, he should have been fired on the spot. Apparently, Save A Lot’s relatively new board of directors, led by part-time chairman Justin Shaw, didn’t see it that way. They’re content (happy?) to let McGrath provide his “special” brand of leadership for a little while longer. Since chairman of the board duties at SAL are not full-time, perhaps Shaw is not fully aware of the less than stellar job McGrath did in his four years at the retailer (don’t ask me, ask some of SAL’s licensees), and is seemingly unconcerned about the intellectual Save A Lot property that the Irish-born executive possesses from his past and continuing tenure at a company that’s been struggling for many years.
I’ve often wondered why, with so many missteps during his tour of duty, McGrath wasn’t shown the door much earlier. But McGrath got the last laugh by parlaying his CEO duties at SAL into a similar but much bigger role at Lidl, the company where he began his retail career in the early 2000s.
Apparently for Justin Shaw and the board, which is allowing McGrath to still remain with Save A Lot and now bring on the experienced but inept Herkert to lead the retailer, this must be their definition of a “win-win” scenario. What a dream team! Then again, I could be missing the point.