Supervalu Posts Q3 Profit but Misses Wall Street Targets

MINNEAPOLIS–Retailer and distributor Supervalu, Inc. yesterday reported record third-quarter net earnings that still fell short of analysts’ expectations, which seemed to negatively impact the performance of other retail stocks.

By the end of the day, shares of Supervalu gave back 3 cents to $33.72. Among industry index components, Winn-Dixie was the biggest percentage decliner, falling 25 cents, or 6.1 percent, to $3.85. Albertsons, Inc. lost 41 cents, or 1.7 percent, to $22.83; Safeway, Inc. was lower by 42 cents, or 2.2 percent, to $18.21 while Kroger Co. retreated by 23 cents, or 1.3 percent, to $16.63.

For the third quarter of fiscal 2005, which ended Dec. 4, 2004, Supervalu reported net sales of $4.6 billion compared to $4.7 billion last year, net earnings of $64.9 million compared to $48.6 million last year, and diluted earnings per share of 48 cents compared to 36 cents last year. The latest quarter includes 9 cents a share of restructuring charges. Thomson First Call's survey of analysts had produced a consensus estimate of 58 cents.

Supervalu also reported an earnings estimate for the year ending Feb. 26 of $2.75 to $2.80 a share, compared with its previous estimate of $2.80 to $2.90.

Jeff Noddle, Supervalu chairman and c.e.o. said in a statement, "I am pleased with the strong operating performance achieved in both our retail and distribution businesses. In addition, our recent agreement to acquire Total Logistics, Inc. will establish a sizable foothold in third party logistics and continue to support Supervalu's ongoing momentum. Our tradition of fresh thinking continues to provide innovative platforms for success."

Third-quarter retail net sales at Supervalu were $2.4 billion, which were flat compared to last year's third quarter. Supervalu attributed this to new-store growth and recovery from last year's strike in St. Louis, which it said was substantially offset by store closures including the Denver store disposition.

Comparable store sales performance for the quarter was negative 0.4 percent, which Supervalu said reflected the soft consumer environment, the impact of hurricanes, and comparison against strong comp increases of 3.0 percent last year.

New store activity since last year's third quarter, including licensed stores, resulted in 72 net new stores, opened and acquired, reflecting a net 68 Save-A-Lot combination stores (grocery and general merchandise) and a net four new regional banner stores for a total of 1,540 stores at the end of the third quarter. Save-A-Lot now operates 1,279 stores, which includes 435 combination stores.

Supervalu's store development plans in fiscal 2005, exclusive of store closings, include approximately 100 new limited assortment food combination stores, approximately 80 limited assortment company-owned store conversions to combination stores, seven to nine new regional banner stores, and approximately 40 regional banner major and minor remodels.
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