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SUPERVALU (SVU) Q2 Earnings In Line, Sales Miss Estimates
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SUPERVALU Inc. plunged almost 9% yesterday, after the company posted disappointing results in the second quarter of fiscal 2017.
After posting a negative surprise of 9.5% in the first quarter of 2017, the company's adjusted earnings per share of 10 cents met the Zacks Consensus Estimate in the second quarter. However, the bottom line plummeted 23.1% year over year from 13 cents due to lower revenues and soft margins. Adjusted earnings exclude $2 million of after-tax charges and costs related to debt refinancing, store closures and impairments, as well as the potential separation of Save-A-Lot and employee severance.
Revenues and Margins
SUPERVALU’s total sales slumped 4.8% year over year to $3.86 billion due to negative identical-store sales in all divisions. Additionally, sales missed the Zacks Consensus Estimate of $3.93 billion by 1.7%.
Adjusted gross profit declined 3.4% year over year to $563 million owing to higher costs of production. Gross margin, however inflated 20 basis points (bps) to 14.6%.
Operating earnings dropped 6.4% to $88 million, while adjusted operating margin remained flat at 2.3%.
Net sales at Retail Food slipped 5.4% to $1.03 billion. Negative identical-store sales of 5.9% led to the deterioration. Customer accounts fell 5.2% and basket size declined 70 bps.
Net sales at the Save-A-Lot stores dipped 2.8% year over year to $1.06 billion due to negative identical-store sales of 5.2%, partially offset by higher sales from new corporate and licensed stores. Identical-store sales for corporate stores within the Save-A-Lot network were negative 5%. Operating earnings declined 31.2% to $22 million mainly due to higher employee-related costs and increased promotional costs. Operating margins deflated 90 basis points to 2.1% of sales.
The Wholesale business fell 5.5% year over year to $1.73 billion, primarily due to stores where the company stopped supplying from the prior year. The downside was somewhat counteracted by increased sales to new outlets operated by existing customers and fresh customers. The Wholesale business’ adjusted operating margin remained expanded 10 basis points to 2.8%.
Corporate
During the fiscal second quarter, fees earned under the TSAs were $41 million as against $48 million last year. Adjusted operating earnings totaled $21 million compared with $11 million last year. The improvement in net corporate operating earnings was largely driven by lower employee-related costs and lesser pension expenses.
Other Financial Update
SUPERVALU’s cash and cash equivalents totaled $57 million as of Sep 10, 2016 compared with $59 million as of Jun 18, 2016. Long-term debt was $2.16 billion as of Sep 10, 2016 compared with $2.26 billion as of Jun 18, 2016.
Save-A-Lot Spin Off
On Oct 17, SUPERVALU announced that it has found a bidder for selling its Save-A-Lot business. SUPERVALU entered into an agreement with private equity firm Onex Corporation under which it will spin off its Save-A-Lot business for $1.365 billion in cash, subject to customary closing adjustments. The deal is expected to be closed by Jan 31, 2017, subject to regulatory requirements.
SUPERVALU will show the Save-A-Lot results as discontinued operations henceforth until the sell-off materializes.
The dissapointing result in the second quarter is reflected in a Zacks Rank #4 (Sell) carried by the SUPERVALU stock. Nonetheless, one can count on better-ranked stocks like The Chefs' Warehouse, Inc. (CHEF - Free Report) , The Kraft Heinz Co. (KHC - Free Report) and Con Agra Foods Inc. (CAG - Free Report) .
The Chef’s Warehouse has a long-term earnings growth rate of 12.5%, while Con Agra Foods has a long-term growth rate of 8.8%. Both these stocks carry a Zacks Rank #2 (Buy).
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SUPERVALU (SVU) Q2 Earnings In Line, Sales Miss Estimates
SUPERVALU Inc. plunged almost 9% yesterday, after the company posted disappointing results in the second quarter of fiscal 2017.
After posting a negative surprise of 9.5% in the first quarter of 2017, the company's adjusted earnings per share of 10 cents met the Zacks Consensus Estimate in the second quarter. However, the bottom line plummeted 23.1% year over year from 13 cents due to lower revenues and soft margins. Adjusted earnings exclude $2 million of after-tax charges and costs related to debt refinancing, store closures and impairments, as well as the potential separation of Save-A-Lot and employee severance.
Revenues and Margins
SUPERVALU’s total sales slumped 4.8% year over year to $3.86 billion due to negative identical-store sales in all divisions. Additionally, sales missed the Zacks Consensus Estimate of $3.93 billion by 1.7%.
SUPERVALU INC Price, Consensus and EPS Surprise
SUPERVALU INC Price, Consensus and EPS Surprise | SUPERVALU INC Quote
Adjusted gross profit declined 3.4% year over year to $563 million owing to higher costs of production. Gross margin, however inflated 20 basis points (bps) to 14.6%.
Operating earnings dropped 6.4% to $88 million, while adjusted operating margin remained flat at 2.3%.
Segment Details
Net sales at Retail Food slipped 5.4% to $1.03 billion. Negative identical-store sales of 5.9% led to the deterioration. Customer accounts fell 5.2% and basket size declined 70 bps.
Net sales at the Save-A-Lot stores dipped 2.8% year over year to $1.06 billion due to negative identical-store sales of 5.2%, partially offset by higher sales from new corporate and licensed stores. Identical-store sales for corporate stores within the Save-A-Lot network were negative 5%. Operating earnings declined 31.2% to $22 million mainly due to higher employee-related costs and increased promotional costs. Operating margins deflated 90 basis points to 2.1% of sales.
The Wholesale business fell 5.5% year over year to $1.73 billion, primarily due to stores where the company stopped supplying from the prior year. The downside was somewhat counteracted by increased sales to new outlets operated by existing customers and fresh customers. The Wholesale business’ adjusted operating margin remained expanded 10 basis points to 2.8%.
Corporate
During the fiscal second quarter, fees earned under the TSAs were $41 million as against $48 million last year. Adjusted operating earnings totaled $21 million compared with $11 million last year. The improvement in net corporate operating earnings was largely driven by lower employee-related costs and lesser pension expenses.
Other Financial Update
SUPERVALU’s cash and cash equivalents totaled $57 million as of Sep 10, 2016 compared with $59 million as of Jun 18, 2016. Long-term debt was $2.16 billion as of Sep 10, 2016 compared with $2.26 billion as of Jun 18, 2016.
Save-A-Lot Spin Off
On Oct 17, SUPERVALU announced that it has found a bidder for selling its Save-A-Lot business. SUPERVALU entered into an agreement with private equity firm Onex Corporation under which it will spin off its Save-A-Lot business for $1.365 billion in cash, subject to customary closing adjustments. The deal is expected to be closed by Jan 31, 2017, subject to regulatory requirements.
SUPERVALU will show the Save-A-Lot results as discontinued operations henceforth until the sell-off materializes.
The dissapointing result in the second quarter is reflected in a Zacks Rank #4 (Sell) carried by the SUPERVALU stock. Nonetheless, one can count on better-ranked stocks like The Chefs' Warehouse, Inc. (CHEF - Free Report) , The Kraft Heinz Co. (KHC - Free Report) and Con Agra Foods Inc. (CAG - Free Report) .
The Kraft Heinz Co has a long-term growth rate of 19.5% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Chef’s Warehouse has a long-term earnings growth rate of 12.5%, while Con Agra Foods has a long-term growth rate of 8.8%. Both these stocks carry a Zacks Rank #2 (Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>