Supervalu Q1 Sales Dip 4%

Supervalu's first-quarter fiscal 2017 net sales of $5.2 billion declined $211 million, or 3.9 percent, from the $5.41 billion logged last year. Net earnings for the Minneapolis-based retailer/wholesaler were $47 million, or 17 cents per diluted share, and when adjusted for nonrecurring costs, were $53 million, or 19 cents per share. This is down from last year’s $63 million in net earnings, or adjusted $65 million.

Wholesale net sales tumbled 7.6 percent, with first-quarter 2017 sales of $2.28 billion, compared with last year’s $2.46 billion. Retail sales were down 2.9 percent: $1.43 billion compared with $1.47 billion. A bright spot was Save-A-Lot, with net sales of $1.43 billion, a 1.7 percent increase from last year’s $1.41 billion.

Supervalu recently added 22 Food Lion stores and Marsh Supermarkets to its roster of customers, and looks to grow its produce business. “It takes time to bring on new business, and our first-quarter results reflect the sales run rate we experienced coming out of last year’s fourth quarter,” said Mark Gross, president/CEO. He remains confident in the Minneapolis-based wholesaler’s ability to bring in new business.

The results missed analysists' expectations of 22 cents per share, and during morning trading, Supervalu stock prices dropped 6.7 percent to $4.93.

First-quarter Results - Continuing Operations

First-quarter net sales were $5.20 billion, compared with $5.41 billion last year, a decrease of $211 million or 3.9 percent. Total net sales within the wholesale segment decreased 7.6 percent. Retail identical-store sales were down 4.5 percent. Save-A-Lot network identical-store sales dipped 1.4 percent. Identical-store sales for corporate stores within the Save-A-Lot network were down 1.0 percent. Fees earned under transition services agreements (TSAs) in the first quarter were $58 million, compared with $64 million last year.

Gross profit for the first quarter was $779 million, or 15 percent of net sales. Last year’s first-quarter gross profit was $810 million, or 15 percent of net sales. The gross-profit rate is flat to last year and includes the impact of lower product-margin rates from investments in lower prices to customers, including higher promotional activities, offset by a favorable business-segment sales mix from new corporate Save-A-Lot stores.

Wholesale

First-quarter wholesale net sales were $2.28 billion, compared with $2.46 billion last year, a decrease of 7.6 percent. The net sales decrease was primarily due to lost stores and lower sales to existing customers, partly offset by increased sales to new stores operated by existing customers and new customers.

Wholesale operating earnings in the first quarter were $64 million, or 2.8 percent of net sales. Last year’s wholesale operating earnings in the first quarter were $77 million, or 3.1 percent of net sales. The decrease in wholesale operating earnings was driven by lower sales and higher employee-related costs.

Save-A-Lot

First-quarter Save-A-Lot net sales were $1.43 billion, compared with $1.41 billion last year, an increase of 1.7 percent. The net sales increase reflected new corporate and licensed stores, partly offset by a network identical-store sales decline of 1.4 percent.

Save-A-Lot operating earnings in the first quarter were $39 million, or 2.7 percent of net sales. Last year’s Save-A-Lot operating earnings in the first quarter were $51 million, or 3.6 percent of net sales. The decrease in Save-A-Lot operating earnings was driven by higher employee-related costs from new corporate stores, higher occupancy costs and higher depreciation expense driven by new corporate stores, and higher shrink.

Retail

First-quarter retail net sales were $1.43 billion, compared with $1.47 billion last year, a decrease of 2.9 percent. The net sales decrease reflected a identical-store sales drop of 4.5 percent, partly offset by sales from new stores.

Retail operating earnings in the first quarter were $8 million, or 0.6 percent of net sales. Last year’s retail operating earnings were $33 million, or 2.2 percent of net sales. The decrease in retail operating earnings was attributed to lower sales and lower product margin rates from investments in lower prices to customers, including higher promotional activities.