Another Down Quarter for Supervalu
Second-quarter fiscal 2013 net sales slipped nearly 5 percent at Minneapolis-based Supervalu Inc. as the grocer struggles to regain its financial footing amid reports of potential suitors for parts of the company.
Supervalu reported Q2 net sales of $8 billion, compared to $8.4 billion last year. Net loss for Q2 totaled $111 million, or 52 cents per diluted share.
The company blames the net sales decline on a 4.3 percent drop in same-store sales and the selloff of most of its retail fuel centers, which contributed $158 million in sales for the year-age period. The sales drop was due to “the stressed consumer, the competitive environment and continued investment in achieving competitive pricing,” Supervalu reported. A bright spot is the Save-A-Lot division; the hard-discount banner shows a modest increase in net sales, mainly due to new store openings. Supervalu’s independent business also showed growth.
The company’s new chief executive remains optimistic about the company’s future.
“We have accomplished a number of important steps since I became president and chief executive officer midway through the second quarter, including the successful refinancing of our credit facility, restructuring our executive leadership team and announcing the closure of 60 stores,” said Wayne Sales, Supervalu president, CEO and chairman. “Our team is aggressively focused on four key strategic imperatives necessary to improve our business: driving profitable retail sales, growing Save-A-Lot, building our network of successful independent retailers and reducing costs. I am excited by the progress we have made in defining our key strategies and specific initiatives within each segment of our business.”
Sales noted the company recently completed price repositioning at its Chicago-based Jewel-Osco banner and is pleased with initial results. “Price is only one part of an overall plan to build traffic and drive customer engagement,” he said. “However, as we measure these results, we are also assessing our on-going approach to price investments, our value proposition and how we go to market. As such, the timing of repositioning half our stores will extend past the end of fiscal 2013.”
Meanwhile, he added, “we are moving quickly on initiatives that will remove significant cost from our business, efforts that will make us more competitive in the future. And, although we have much to do, I am encouraged every day by the quality of our team members and their commitment to our success.”
Year to date, Supervalu has generated more than $400 million in cash flow from operations, Sales said, indicating he expects that to approach $950 million in FY 2013, including the proceeds from asset sales. “We will use this to reduce our outstanding debt and keep our stores fresh and appealing,” he said.
Q2 retail food net sales were $5.2 billion compared to $5.61 billion last year, a decline of 7.3 percent. Retail food operating loss was $83 million and included $142 million in net pre-tax.
Save-A-Lot’s Q2 net sales were $973 million, up from $972 million last year, reflecting 47 net new stores being operated at the end of the quarter, offset by the impact from a drop in network same-store sales of 3.7 percent.
Independent business net sales were $1.87 billion compared to $1.85 billion last year, an increase of 1.1 percent, primarily due to higher sales to existing customers.
Supervalu Inc. operates a network of 4,400 stores composed of 1,099 traditional retail stores, including 797 in-store pharmacies; 1,341 Save-A-Lot stores, of which 943 are operated by licensee owners; and 1,950 independent stores serviced primarily by the company’s food distribution business.