Earnings Preview: Supervalu Inc.

Supervalu Inc. (SVU - Analyst Report) is slated to release its second quarter of fiscal 2013 results before the opening bell on October 18, 2012. The Zacks Consensus Estimate for the second quarter is pegged at 13 cents (year-over-year decline of 53.6%) on revenues of $8.04 billion (year-over-year decline of 4.6%).

First Quarter Recap

Supervalu, one of the largest grocery chains in the U.S., reported first quarter fiscal 2013 earnings per share of 19 cents, missing the Zacks Consensus Estimate by 50% and the prior-year quarter earnings by 45.7%. The lower-than-expected results were due to sluggish sales in the quarter.

Supervalu’s total sales dipped 4.5% to $10.6 billion in the first quarter of fiscal 2013 from prior-year sales of $11.1 billion. Revenue also missed the Zacks Consensus Estimate of $10.9 billion. Lower customer spending due to the ongoing economic challenges, aggressive pricing by competitors and decline in same store sales negatively impacted the company’s sales.

Agreement of Estimate Revisions

Over the past 30 days, only 1 of the 12 analysts covering the stock revised their earnings estimate for the second quarter of fiscal 2013. The revision was in the downward direction. None of the analysts revised their estimates in the opposite direction.

Likewise, for fiscal 2013, only 1 of the 13 analysts changed their estimate in the negative direction over the past 30 days. None of the analysts have revised it in the opposite direction.

The downward revision in estimates can be attributed to the burden of rising input costs along with consistently declining same store sales.

Magnitude of Estimate Revisions

The Zacks Consensus Estimates for the second quarter and fiscal year 2013 have remained static over the past 30 days at 13 cents and 66 cents per share, respectively.

Surprise History

Supervalu has surpassed earnings estimates in two of the last four quarters. It has met the earnings estimate in one quarter, while missing it in another quarter. The earnings surprise ranges from a negative 50.0% to a positive 40%, with the average earnings surprise being negative 0.48%.

Our Recommendation

We feel that Supervalu and its peers are facing tough times due to low disposable income of consumers. Moreover, the U.S. Food and Drug Administration (FDA) is increasingly becoming more and more vigilant regarding food and health standards. Adverse publicity regarding food and drugs is affecting consumer confidence and preventing them from buying the company’s products resulting in product and delivery disruptions.

Supervalu faces stiff competition from Wal-Mart Stores Inc. (WMT - Analyst Report), The Kroger Co. (KR - Analyst Report) and Safeway Inc. (SWY - Analyst Report). Currently, we have a Neutral recommendation on the stock. Further, Supervalu holds a Zacks #3 Rank (short-term Hold rating).