USA: SUPERVALU reports mixed fiscal 2002 results
Minneapolis-based retailer SUPERVALU INC. has posted sales of US$20.9bn for fiscal 2002, ended 23 February, down from US$23.2bn last year, excluding the impacts of restructure and other items.
Net earnings rose to US$240.7m from US$235.9m in 2001, and diluted earnings per share reached US$1.80 from US$1.78. EBITDA was US$916m, or 4.4% of sales, up 40 basis points, compared to US$921.6m in 2001, 4% of sales.
SUPERVALUE reported Q4 sales of US$4.7bn, compared to US$5.5bn last year; net earnings of US$70.1m up 14.7% on 2001; and diluted earnings per share of US$0.53 up 15.2% on US$0.46. Q4 EBITDA was US$237.3m, 5.1% of sales, up 90 basis points, compared to US$230m last year, or 4.2% of sales.
Jeff Noddle, SUPERVALU president and CEO said: Our double digit Q4 earnings growth reflects a strong ending to a year of significant activity. We are pleased to have delivered above consensus results in the Q4. In addition, we delivered four consecutive quarters of retail comparable sales improvement with Q4 retail comparable sales of positive 1.3%. The growing mix of our retail business in the Q4, representing more than 50% of total revenues, generated strong results contributing approximately 67% of operating earnings."
During the Q4, SUPERVALU identified additional efforts that will allow it to extend its distribution efficiency program begun in fiscal 2001, as well as adjust prior years' restructure reserves for changes in estimates primarily related to real estate as a result of a softening real estate market. The total pre-tax restructure charges were US$46.3m; US$16.3m related to additional efficiency efforts; US$17.8m related to changes in estimates for the fiscal 2001 restructure reserves; and US$12.2m related to changes in estimates for the fiscal 2000 restructure reserves. In addition, SUPERVALU saw $12.5m in store closing reserves in the Q4.
Reported results for fiscal 2002 and Q4, including the impacts of restructure and other items, were sales of US$20.9bn and US$4.7bn, net earnings of US$205.5m and US$34.9m, and diluted earnings per share of US$1.53 and US$0.26, respectively.
Noddle added: "Our results throughout fiscal 2002 were excellent given the scope of the transition we undertook. We delivered upon our objectives during the year and today the future of SUPERVALU is stronger.
"The important tactical steps taken in Fiscal 2002 are in line with our strategy to improve SUPERVALU's long-term growth rate. As we take the momentum established in fiscal 2002 to the next level, our commitment remains on the effective utilization of our strong cash flow for improved returns and growth opportunities. We will work diligently to implement our business plans that include expansion of our key retail markets, including acceleration of Save-A-Lot, and the continuation of efficiency initiatives in distribution."
The preliminary earnings per share outlook for fiscal 2003 ending 22 February 2003, is US$2.20 to US$2.35. This outlook encompasses the elimination of goodwill amortization in accordance with FAS 142 of about US$0.35 per share. The corresponding earnings per share outlook for the Q1 ending 15 June 2002 is US$0.55 to US$0.60. Retail comparable sales for the year are expected to remain positive at least 1%, reflective of a slowly recovering economy.
Retail Food Segment
For the year, retail sales were US$9.5bn, an increase of 2.1% on 2001. Q4 retail sales were flat at US$2.4bn. Excluding the sales associated with the exit of non-core or under-performing stores, FY retail sales increased 6% and 6% for the Q4. Comparable sales growth was 0.2% for the FY and 1.3% for the Q4. During 2002, the company opened 115 new stores, including 103 Save-A-Lot stores, 11 price superstores and one conventional supermarket, and closed 49 stores. During the Q4, it opened 47 new stores, including 46 Save-A-Lot stores and one price superstore, and closed three stores.
FY operating earnings were US$387.5m, a 12.1% increase on 2001. Operating earnings for the Q4 were US$108.7m, a 33.3% increase on 2001. Operating margins rose 40 basis points for the year and 110 basis points for the Q4. FY and Q4 operating earnings reflect new stores, continued strong growth at Save-A-Lot, and improved merchandising execution.
For the year, SUPERVALU's retail segment generated EBITDA of US$565.1m, or 5.9% of sales, up 40 basis points from the prior year. For the Q4, EBITDA was US$154.4m or 6.5% of sales, up 110 basis points from the prior year.
Food Distribution Segment
For the year, food distribution sales were US$11.4bn, down about US$2.5bn on 2001. Q4 sales were US$2.3bn, down about US$855m on last year due to customer losses and primarily the exit of the Kmart contract, which was terminated 30 June 2001. In addition, distribution sales decreased as a result of the impact of restructure activities.
As expected, FY distribution operating earnings were US$227m compared to US$275.4m for 2001. Q4 distribution operating earnings were US$53.7m, compared to US$74.2m for 2001. The Q4 operating margin of 2.4% was flat. FY operating margin of 2% also matched 2001's margin level, a strong performance in light of the volume decline. This performance reflects the benefits of restructure and reconfiguration activities.
For the year, EBITDA was US$387.7m or 3.4% of sales, up 20 basis points from the prior year. Q4 EBITDA was US$90.8m, or 4% of sales, up 50 basis points from the prior year.
At year-end, funded debt, which excludes capitalized leases, fell US$350m from 2001. Total debt to capital, including capitalized leases, was 54.1% compared to 59.6% at 2001 year-end. Net interest expense during the year declined to US$172.8m on lower borrowing levels as well as lower interest rates in the current year. The effective tax rate for the year was 40.2%. Diluted average shares outstanding increased slightly for the year to 134 million shares. As of 23 February 2002, SUPERVALU had 132.9 million shares outstanding.
Capital spending for 2002 was US$388.7m, including US$95.7m in capitalized leases, funding retail store expansion, store remodeling and technology enhancements. New store openings for fiscal 2003 are projected at 10 to 15 price superstores and at least 150 extreme value food stores, including licensed locations. Fiscal 2003 total capital spending is projected at approximately US$500-525m, including about US$80m in capitalized leases, as well as the purchase of today's announced acquisition of Deal$ - Nothing Over a Dollar, LLC, a 45-store general merchandise retailer specializing in single price point merchandise.
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