Last October, SUPERVALU's (NYSE: SVU) Save-A-Lot grocery chain and Rite-Aid (NYSE: RAD) opened 10 co-branded test stores in South Carolina. These stores have enjoyed some success with budget-conscious shoppers, and the two companies could now be looking to further that venture. Will this deal matter to investors?
The financials
SUEPRVALU reported a sequential 5% drop in its fourth-quarter same-store sales. Despite this, performance in the Save-a-Lot stores was far more promising. And same-store sales at the co-branded concept stores increased by nearly 83% in the quarter, which would give the two entities motivation to go ahead and further expand this concept.
For its part, Rite-Aid also showed flat revenue in the latest quarter from the year-ago period. Rite-Aid's CEO, looking at the promising performance of the co-branded stores, said that the company might consider putting some of its $300 million investment budget into the concept stores. So more co-branded stores definitely seem to be in the cards, especially considering the tough times that each entity is seeing on its own.
The Foolish bottom line
I believe that after looking at the success of the test stores, the two companies will look to expand on the joint stores in the future. Plus, given their falling revenues, joining forces might possibly give the required boost to get back on track and compete with rival retailers Kroger (NYSE: KR) and Walgreen (NYSE: WAG). Let's wait and watch what steps SUPERVALU and Rite-Aid take -- and whether those steps will be together.
