Supervalu to Continue Aggressive Save-A-Lot Expansion

MINNEAPOLIS - Leading food retailer and distributor Supervalu, Inc. said yesterday it would continue to focus on growing its licensed and corporate Save-A-Lot stores, as the company strengthens its position as one of the top food companies in the country. With Save-A-Lot, Minneapolis-based Supervalu already holds the number one market position in the extreme-value grocery retailing sector.

C.e.o. and chairman Jeff Noddle noted, "We don't want to lose a day's momentum [on Save-A-Lot's growth]," during an earnings conference call, in which the company reported results for its first quarter of fiscal 2005, which ended June 19, 2004.

New store activity since last year's first quarter resulted in 71 net new stores opened and acquired, including a net 69 Save-A-Lot combination stores (grocery and general merchandise) and a net two regional banner stores, according to the company.

Supervalu's outlook for fiscal 2005, taking general business assumptions into account, includes store development plans for 110 to 140 new extreme value food combination stores, approximately 90 conversions to extreme value combination stores, eight to 10 new regional banner stores, and approximately 30 regional banner major remodels.

When asked if more distribution centers would be added to support the growth, Noddle said: "We have 16 distribution centers now. We've always said we'd prefer at least 100 stores to support the distribution center in order to reach our efficiencies. I believe we have plans for another one this year, and I'd estimate that as our store network grows, you could expect a constant flow of one or two distribution centers a year."

For the quarter, Supervalu reported net sales of $5.9 billion compared to $5.8 billion last year, net earnings of $149.4 million compared to $73.7 million last year, and diluted earnings per share of $1.09 compared to $0.55 last year.

For the retail food segment, comparable store sales grew 1.8 percent and were broad-based across the Supervalu retail network, including continued positive comparable store sales at Save-A-Lot. First-quarter retail net sales were $3.1 billion, an increase of 5.9 percent compared to last year's first quarter, reflecting new-store growth and growth in comparable store sales.

Meanwhile, distribution net sales were $2.8 billion, a decrease of 3.4 percent compared to last year's first quarter, reflecting last year's asset exchange with C&S of the Fleming Midwest business for Supervalu's New England operations, the exit of the Denver operation, and normal customer attrition, which more than offset new business growth.

First-quarter results included a net after-tax gain on the sale of the company's minority interest in WinCo Foods, Inc., a privately held grocery chain, of $68.3 million, or $0.50 diluted earnings per share. Also included in first quarter results is a $0.03 diluted earnings per share redemption premium charge associated with the May 2004 early retirement of $250 million of debt.

As of June 19, Supervalu's retail store network consisted of 1,498 stores in 39 states, including 1,239 Save-A-Lot extreme value stores -- 275 owned Save-A-Lot stores, 832 licensed Save-A-Lot stores, and 132 owned Deals stores; and 259 regional banner stores including Cub Foods, Shop 'n Save, Shoppers Food Warehouse, bigg's, Farm Fresh, Scott's Foods, and Hornbacher's stores.

-- Jenny McTaggart
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