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Supervalu's Earnings Drop as Costs Increase

EDEN PRAIRIE, Minn. - Supervalu's third-quarter earnings dropped 15 percent because of increased costs, including a strike at its St. Louis stores and the company's exit from its Denver operations.

Supervalu earned $48.6 million, or 36 cents a share, during the three months ended Nov. 29, down from $57.1 million, or 43 cents a share, in the same period last year. Net sales were $4.7 billion, up from $4.6 billion last year.

Citing costs of 16 cents per share from the 28-day strike in St. Louis, the exit from Denver, and an early bond redemption, Supervalu said those costs also included $7.6 million in taxes due for an asset exchange with Brattleboro, Vt.-based C&S Wholesale Grocers.

Chairman and c.e.o. Jeff Noddle said Supervalu is generating enough cash that it redeemed $100 million of long-term debt during the third quarter.

For the first three quarters of fiscal 2004, the company reported earnings of $184.5 million, or $1.37 per share, compared with $193.1 million, or $1.43 per share, last year. Net sales were $15.2 billion, compared with $14.5 billion last year.

Supervalu's retail store network, including licensees, consists of 1,468 stores in 40 states, among them 1,211 Save-A-Lot and Deals stores, and 257 regional grocery stores, including Cub Foods, Shop 'n Save, Shoppers Food Warehouse, bigg's, Farm Fresh, Scott's Foods and Hornbacher's. It's also the primary distributor to approximately 2,500 stores and secondary supplier to approximately 1,000.

The wholesaler/retailer yesterday projected that its fourth-quarter earnings would be above Wall Street expectations, and company shares soared more than 10 percent, jumping $2.57 to $27.95 on the New York Stock Exchange.

Separately Supervalu said that it has completed the conversion of all 15 Baltimore-area Metro Food stores to its Shoppers Food Warehouse banner, a move that unifies the company's 58 stores throughout Washington, D.C.; Baltimore; and northern Virginia.

"We are excited about the opportunity to grow Shoppers Food Warehouse in the Baltimore area," said John Hooley, president and c.o.o., retail food companies. "This swift conversion, which we began in midsummer, will allow us to quickly build upon our market position in Baltimore. At the same time our ability to increase our critical mass in that growing market will improve the efficiency of the Shoppers network as we advance the success of that entire chain."

The average size of the 15 newly remodeled Baltimore stores ranges from 45,000 to 50,000 square feet.

The company said it expects to continue investing in key regional retail markets, including Washington, D.C.; Baltimore; Virginia Beach, Va.; Minneapolis; and St. Louis, and expects its capital spending for fiscal 2004 to be approximately $410 million -- including $50 million in capital leases -- with the majority allocated to its retail operations.

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