Supervalu’s Q2 Net Sales, Earnings Rise

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Supervalu’s Q2 Net Sales, Earnings Rise

10/18/2017

Supervalu’s latest quarterly financials were buoyed by the solid growth of its wholesale business, as well as the inclusion of Unified Grocers, which the retailer-wholesaler acquired earlier this year. Even so, its retail operations remained in the red. 

The Eden Prairie, Minn.-based company posted second-quarter fiscal 2018 consolidated net sales of $3.80 billion, an increase of $995 million, or 35 percent, from the $2.81 billion logged last year, and total net sales and a net loss from continuing operations of $25 million, which included a $27 million after-tax asset impairment charge and $16 million of after-tax merger and integration costs. When adjusted for these items, net earnings from continuing operations came to $18 million, or 46 cents per diluted share.

Supervalu’s net earnings from continuing operations for 2017’s second quarter were $12 million which included a net $3 million after-tax gain, comprising a fee received from a supply agreement termination and partly offset by store closure charges and costs. Adjusted second-quarter fiscal 2017 net earnings from continuing operations were $9 million, or 21 cents per diluted share.

Continuing a trend from Q1 of fiscal 2018, however, the company’s second-quarter retail net sales dipped 1.1 percent to $1.02 billion, compared with $1.03 billion last year. The net sales decrease reflected an identical-store sale decline of 3.5 percent and closed stores, partly offset by sales from acquired and new stores, the company said. 

Supervalu’s retail operating loss in the quarter was $58 million, including $42 million asset impairment charge. When adjusted for this item, retail operating loss in the second quarter was $16 million, or a 1.5 percent decrease in net sales. Last year’s second quarter retail operating loss was $12 million, and included $4 million of store closure charges and costs. Adjusted second-quarter retail operating loss for 2017 was $8 million, or 0.8 percent of net sales. According to the company, the decrease in adjusted retail operating earnings was attributable to lower gross margins from higher promotional activities and net decreased sales.

Gross profit for the quarter was $428 million, or 11.3 percent of net sales, compared with $396 million, or 14.1 percent of net sales, for the year-ago period, which included $1 million of store closure charges and costs. Supervalu attributed the gross profit rate decrease to the change in business segment mix, with wholesale accounting for a larger portion of total sales and gross profit.

“We continue to make tremendous strides in driving our strategy, evidenced by another quarter of strong growth from our core wholesale business which now represents over 70 percent of net sales,” said Supervalu President and CEO Mark Gross. “Additionally, our results now include the benefit of Unified Grocers, where I’m pleased that the transition is going well. We have a lot to be excited about as we turn our focus toward the back half of our fiscal year.”

Wholesale, Corporate Earnings

Indeed, Supervalu’s second-quarter wholesale net sales were $2.74 billion, versus $1.73 billion last year, an increase of 58 percent, primarily because of sales from Unified Grocers’ business, sales to new customers and increased sales to new stores operated by existing customers, although partly offset by stores no longer being supplied by Supervalu, and lower military sales, according to the company

Wholesale operating earnings in the second quarter came to $61 million, or 2.2 percent of net sales, versus $58 million in the year-ago period, which included a fee received from a supply agreement termination of $9 million. Last year’s second-quarter adjusted wholesale operating earnings were $49 million, or 2.8 percent of net sales. Supervalu said this decline in adjusted wholesale operating earnings, as a percent of net sales, was caused by lower operating earnings, as a percent of net sales, from Unified Grocers.

Net corporate operating loss in the second quarter of 2018 came to $10 million, including $23 million of merger and integration costs. Adjusted net corporate operating earnings were $13 million. Second-quarter net corporate operating earnings in 2017 were $12 million.

Supervalu currently expects net earnings from continuing operations range from $31 million to $50 million. Adjusted EBITDA, including the contribution from Unified Grocers, is anticipated to be in the range of $475 million to $495 million.

In other news, the company has revealed its pending acquisition of Pompano Beach, Fla.-based Associated Grocers of Florida.

One of the largest grocery wholesalers and retailers in the United States, Supervalu serves customers across the country through a network of 3,337 stores comprising 3,120 wholesale primary stores operated by customers serviced by its food distribution business and 217 traditional retail grocery stores operated under five retail banners across six geographic regions.