Supervalu’s Q1 earnings have fallen 15% but are above expectations. Although sales dipped due to store closings, the grocery retailer and wholesaler’s earnings slightly exceeded Wall Street expectations. It’s not rosy news, but it is a positive indicator for Supervalu as it tries to expand its retail scope. The company now operates about 1,200 stores, but it has suffered recently amid stiff competition from Target and Wal-Mart supercenters.
Supervalu, the Minneapolis-based parent of Cub Foods, Save-A-Lot and Shop ‘n Save grocery chains said its Q1 earnings totaled $59.4 million, or 45 cents per share, compared with $70 million, or 53 cents per share, during the same quarter last year. The average estimate of analysts polled by research firm Thomson Financial/First Call was 43 cents per share.
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Sales for the quarter fell to $6.93 billion from $6.95 billion a year earlier. Supervalu said the dip reflected previously announced store closures, which are part of the company’s restructuring to eliminate non-core markets and underperforming stores. In early April, the company announced plans to eliminate 4,500 jobs and close four distribution centers
as it realigns its priorities. The company still garners about 60% of its sales from food distribution, but only about 40% of its profits come from that business.
In its food distribution business, Supervalu said sales performance reflected a soft economic environment and lower volumes from Kmart. Supervalu and Fleming had shared the Kmart account, but Kmart’s contract with Supervalu, valued at $2.3 billion, has been canceled effective June 30, at which time Supervalu will cease shipments to Kmart and close two more distribution facilities this summer.
“First-quarter results were ahead of Wall Street’s consensus as the aggressive implementation of our business plans is showing good progress in distribution and retail,” said Jeff Noddle, president, chief operating officer. “Retail business also delivered better-than-expected and broad-based improvement in comparable sales compared to last year’s fourth quarter.” He said the Q2 outlook was in the range of 35 cents to 38 cents per share, against a Thomson Financial/First Call’s estimate of 39 cents.
As the nation’s largest food wholesaler, Supervalu supplies about 5,700 grocery stores in 48 states with brand name and private-label goods. It is a major retailer as well, with more than 1,100 stores. The company recently expanded in the Mid-Atlantic region with its purchase of Richfood, a food distributor that also owns about 100 supermarkets.
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