Back to top

Analyst Blog

Supervalu Inc. (SVU - Analyst Report) posted adjusted loss per share of 14 cents for the fourth quarter of fiscal 2013 ended Feb 23, 2013, compared with the Zacks Consensus Estimate of a profit of 14 cents. However, SVU had delivered earnings of 2 cents per share in the comparable quarter a year ago.

The adjusted earnings exclude after-tax charge of $149 million or 71 cents per share related to non-cash asset-impairment and employee severance.

The lower-than-expected results were due to the disappointing same store sales during the quarter and reduced discretionary spending by consumers in the U.S. due to the ongoing economic challenges.

Revenues and Margins

Supervalu’s total sales dipped 2.3% to $3.9 billion from $4.0 billion in the year-ago quarter. Sales missed the Zacks Consensus Estimate of $7.9 billion. Lower customer spending and aggressive pricing by competitors negatively affected Supervalu’s sales.

The gross margin contracted 30 basis points (bps) to 14.1% in the quarter on account of higher advertising spending, investment in the fair price plus promotion strategy partially offset by lower promotional spending.

Segment Details

Net sales at Retail Food declined 4.4% to $1.09 billion in the fourth quarter of fiscal 2013 compared with $1.14 billion in the prior-year quarter. Results were impacted by a same-store sales decline of 4.1% due to aggressive pricing by peers and lower consumer spending in several markets. Operating loss in the segment contracted 80 bps to 2.8% in the reported quarter on the back of disciplined cost cutting measures.

Net sales at Save-A-Lot dipped 1.5% to $969.0 million compared with $984.0 million in the year-ago quarter. The decline was due to negative identical store sales of 2.6% partially offset by benefits from new store openings. The Save-A-Lot operating margin declined 40 bps in the reported quarter to 3.9% due to fair price investment made by the company and negative identical store sales.

Net sales at Independent business declined 1.3% to $1.83 billion in the fourth quarter of fiscal 2013 compared to the year-ago level. Lower spending by the existing customers hurt sales in this segment. The Independent business’ operating margin remained flat at 2.6% during the quarter.

Full Year 2013 Results

For fiscal 2013, adjusted loss per share of 36 cents was wider than the year ago loss of 4 cents. Net sales for fiscal 2013 declined 1.1% to $17.1 billion during the year.

Other Financial Update

Cash and Cash equivalents of Supervalu were $72.0 million as of Feb 23, 2013, versus $155.0 million as of Dec 1, 2012. Long-term debt and capital lease obligations were $2.8 billion as of Feb 23, 2013, compared with $6.2 billion as of Dec 1, 2012.

Sellout of Supermarkets

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, comprising a total of 877 stores, 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.

Other Stocks to Consider

Currently, Supervalu has a Zacks Rank #3 (Hold). Other stocks in the Consumer Staples segment like Flowers Foods Inc. (FLO - Snapshot Report),and Green Mountain Coffee Roasters Inc. (GMCR - Analyst Report), which carry a Zacks Rank #1 (Strong Buy), and Kraft Foods Group Inc. (KRFT - Analyst Report) that carries a Zacks Rank #2 (Buy) and currently doing well.

Please login to Zacks.com or register to post a comment.