Supervalu Inc. ( SVU - Analyst Report ) , one of the largest grocery chains in the US, broke even on a per share basis for the second quarter fiscal 2013, lagging the Zacks Consensus Estimate of 12 cents and the prior-year quarter earnings of 28 cents a share. The weak results were due to disappointing sales in all the segments during the quarter.

Revenues and Margins

Supervalu’s total sales dipped 4.6% to $8.0 billion in the second quarter of fiscal 2013 from prior-year sales of $8.4 billion. The reported revenue was in line with the Zacks Consensus Estimate of $8.0 billion. Sales were negatively impacted by lower customer spending due to the ongoing economic challenges, aggressive pricing by its competitors and weak identical stores sales.

Net sales at Retail Food declined 7.3% to $5.2 billion in the second quarter of fiscal 2013, compared with $5.6 billion in the prior-year quarter. Results were impacted by negative same-store sales of 4.3% and sale of fuel centers.

Net sales at Save-A-Lot remained more or less flat at $973 million compared with $972 million in the prior-year quarter. The marginal increase of 0.1% came on the back of 47 additional stores that operated at the end of the second quarter.

Net sales at Independent business grew 1.1% to $1.87 billion in the second quarter of fiscal 2013 compared with $1.85 billion in the prior-year quarter, driven by an increase in sales in the existing market.

Gross margin contracted in the second quarter of fiscal 2013 on account of higher advertising spending, competitive pricing and changes in business segment mix.

Other Financial Update

Cash and cash equivalents of Supervalu, as of September 8, 2012, were $148 million, compared with $151 million as of June 16, 2012. Long-term debt and capital lease obligations were $6.1 billion as of September 8, 2012 compared with $6.0 billion as of June 16, 2012.

Outlook

The company intends to add 20 additional Save-A-Lot stores in fiscal 2013. The company also plans to bring down capital expenditure to a range of $450.0 to $500.0 million in fiscal 2013 and reduce debt by $400.0 to $450.0 million in fiscal 2013.

A peer of Marks & Spencer Group PLC ( MAKSY ) , Supervalu Inc. has been generating weak results for the past two quarters. However, the company has embarked on several initiatives that will help it to maintain financial flexibility, price its goods at par with its competitors, as well as reduce costs in fiscal 2013.

Supervalu Inc. carries a Zacks #3 Rank that translates into a short-term ‘Hold’ rating. Longer-term, we are maintaining our Neutral recommendation on Supervalu Inc.