Supervalu Continues to Shore Up Sales in Q2

There was good news and bad news for Supervalu Inc. in the second quarter of its 2015 fiscal year.

The good: Overall sales continue to grow and its hard-discount Save-A-Lot banner continues to be a good performer.

The bad: Hackers struck the grocer's data network twice, forcing costly repairs to its technology infrastructure.

The Minneapolis-based wholesaler and retailer reported Q2 net sales of $4.02 billion, up 1.8 percent from $3.95 billion for the same period a year ago. Same-store sales at Save-A-Lot rose 6.5 percent (8.2 percent for corporate stores) and 0.4 percent for the company's overall Retail Food segment. Total sales for its Independent Business segment fell 1.1 percent.

3rd Consecutive Quarter of Positive Sales

"Midway through fiscal 2015, I am encouraged with the progress we have made across the business,” said Supervalu President and CEO Sam Duncan. “The investments we have made at Save-A-Lot continue to drive sales and our Retail Food stores recorded their third consecutive quarter of positive identical store sales. The addition of the Rainbow stores [in the Twin Cities] this past quarter is a positive for our Independent Business and we are encouraged by the early results.”

This is a far cry from how things looked at Supervalu more than two years ago, when the company cleaned its executive house and sold several of its retail banners back to Albertsons after years of underperformance, including 18 consecutive quarters of declining sales.

Despite the quarter's overall rosier financial picture, Supervalu incurred $1 million in after-tax information technology intrusion costs, net of insurance recoverable, following two data breaches that impacted not only several Supervalu banners, but also many of those sold to Albertsons because Supervalu continues to provide third-party IT services to that company as part of a transition services agreement.

When adjusted for breach-related costs, Q2 net earnings from continuing operations were $32 million, or 11 cents per diluted share, compared to $40 million (15 cents per diluted share) for the year-ago period.

Independent Business

Q2 Independent Business net sales were $1.82 billion compared to $1.84 billion last year, primarily due to lost accounts, including one New Albertson’s Inc. banner that completed the transition to self-distribution and a larger lost customer, and lower military sales, partially offset by new business including increased sales to existing customers. Adjusted earnings for the segment were $59 million, or 3.2 percent of net sales. The decrease was primarily attributable to higher employee-related costs and lower margins from stronger private brands pricing support and lower levels of vendor funding.

Save-A-Lot

Q2 Save-A-Lot net sales were $1.05 billion compared to $972 million last year, an increase of 8 percent, reflecting the impact from network identical store sales of positive 6.5 percent. Q2 operating earnings were $26 million, or 2.5 percent of net sales.

Retail Food

Retail Food net sales were $1.1 billion for Q2 compared to $1.07 billion last year. Identical store sales were positive 0.4 percent. Earnings were $20 million, or 1.8 percent of net sales.

Supervalu Inc. operates a network of 3,336 stores composed of 1,807 independent stores serviced primarily by the company’s food distribution business; 1,332 Save-A-Lot stores, of which 928 are operated by licensee owners; and 197 traditional retail grocery stores.