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Supervalu Inc (SVU - Analyst Report) is set to report its 2013-fourth quarter results on Apr 24 before the market opens. In the last quarter, the company posted a 50% negative surprise. Let’s see how things are shaping up for this announcement.

Factors for Decline This Past Quarter

Supervalu was adversely affected by the slow economic recovery and low disposable income of the U.S. consumers, which resulted in cautious spending in the quarter. Disappointing same-store sales led sales to slip by 5% to $7.9 billion from the year-ago level. Earnings were lower than expected due to higher advertising spending, investment in the fair price plus promotion strategy and changes in the business segment mix.

On Mar 18, 2013, as a part of broad-based strategic alternatives, Supervalu sold Albertson's, Jewel-Osco, Acme, Shaw's and Star Market chains, having a total of 877 stores in combination, to equity firm Cerberus Capital Management LP, for $3.3 billion.

Management commented that it wanted to streamline its operations in order to focus on Save-A-Lot discount stores, as well as its smaller regional chains – Cub, Farm Fresh, Shoppers, Shop 'n Save and Hornbacher's.

Supervalu is also trying to combat four years of negative identical store sales and re-position the company for growth, by expanding its private brand portfolio and step up cost-reduction initiatives. As a part of the effort, the company has reduced its headcount by 1,100 from nearly all of the company’s offices and department stores

Earnings Whispers?

High promotional spending and aggressive pricing policy of the competitors are crippling margins.

There has been a very limited estimate revision in the past 90 days. As a result, the Zacks Consensus Estimate remained at 19 cents for the fourth quarter of fiscal 2013 and 42 cents for the fiscal 2013.

The company has reported negative surprises for three of the last four quarters with a trailing average surprise of negative 47.86%.

The sellout of supermarket chains, however, is expected to help the company in focusing more on Save-A-Lot discount stores that may help the company boost sales in the coming quarters. Cost reduction initiatives are expected to reduce administrative and operational expense by an additional $250 million by fiscal 2014.

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