Supervalu Setting Up IT Shop in India; Ups Q3 and Q4 Guidance

MINNEAPOLIS - Like Tesco and Target before it, Supervalu here is reportedly setting up an IT shop in Bangalore, India, planning a $50 million investment over the next five years.

The retailerwholesaler also said it was upping its guidance for the last half of fiscal 2007, on the plumped up performance owing to its acquisition of "Albertsons' premier retail properties" in June.

News reports circulated in India about Supervalu's plan to set up operations in Bangalore to support its overall IT requirements. The new subsidiary, Supervalu Services India (SSI), will employ 50 people, added to 1,800 associates working at three different locations in the U.S. as part of its IT division. The company plans to grow SSI to a team of 300 IT professionals in the next 12-18 months, the reports said.

"SSI will be a key part of Supervalu's IT organization and will help in new applications development, technical operations and testing to support the overall corporate functions of the company including the retail and supply chain operations," Supervalu c.i.o. Paul Singer was quoted as saying. "We want to build a strong local team here with strong skills in Java and other leading edge development tools."

Supervalu already reportedly works with 800 outside contractors, of which 200 are based out of India. The company works with many Indian IT companies for sourcing the applications and solutions required for its retail management.

The Bangalore team will work on end-to-end application developments, supporting the IT division round the clock. SSI will work on about 400 projects involving development of software applications and end-to-end solutions in retail operations, spanning supply chain management procurement logistics and accounting.

Singer said Supervalu would gain a 40 to 50 percent cost advantage by setting up IT operations in the subcontinent.

In other news, the leading grocer said it was raising its earnings guidance to 60 cents to 63 cents a share, before adjustments, in the third quarter, and 67 cents to 72 cents a share, before adjustments, in the fourth quarter.

The earnings per share guidance, on a GAAP basis, went to $2.32 to $2.43 per share, from its earlier range of $2.18 to $2.41 per share, and includes charges for one-time transaction costs, expense from the adoption of FAS 123R related to stock option expensing and the impact of the Hybrid Income Term Security Units (HITS) which did not settle upon close of the acquisition. The company will release its full third quarter results on January 9, 2007.

Jeff Noddle, chairman and chief executive officer, said, "Our earnings per share for the year remains on track as we continue to implement our business plans following the June 2, 2006 acquisition of Albertsons premier retail properties. We continue to move forward on our many initiatives and will report our full progress on the third quarter earnings conference call in January."

In still other news, Supervalu's wholly owned subsidiary, New Albertson's, Inc., notified the New York Stock Exchange of its intention to voluntarily delist its 7.25 percent hybrid income term security units held in the form of corporate units, the latter of which are currently traded on the NYSE under the symbol ABSPR.

New Albertson's said it also intends to deregister the corporate units from registration with the Securities and Exchange Commission. To complete the delisting and deregistration, New Albertson's intends to file a Form 25 with the SEC on December 26, 2006, and expects the filing to be declared effective on January 8, 2007. It is expected that the NYSE will suspend trading of the corporate units beginning on January 8, 2007.
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