US retailer Supervalu has said it plans to sell 20 corporate retail stores in Pittsburgh, incurring related after-tax charges of US$38-43m, or 26-30 cents per share, during fiscal 2006.
The company said it expects diluted earnings per share for the second quarter to be around 48 to 50 cents per diluted share before the anticipated charges associated with the sale of the stores in Pittsburgh. The majority of the charge will occur in the second quarter to 10 September. Supervalu said the second quarter earnings outlook primarily reflects the softening sales environment across the company’s operations.
Supervalu said it expects negative comparable store sales in the second quarter of approximately 2%. The earnings outlook also includes additional costs of approximately 2 cents per diluted share, reflecting higher than anticipated start up costs for the new technology investment in supply chain services.
“The sales environment has weakened since the first quarter as the impact of higher fuel prices continues to unfold across the consumer spending landscape. We are working to refine our merchandising programs during this challenging environment to generate sales improvement,” said Jeff Noddle, Supervalu chairman and CEO.
The company expects many of the Pittsburgh Shop ‘n Save locations to be acquired by existing Shop ‘n Save independent operators who currently operate 55 stores in the Pittsburgh and surrounding market areas.
For fiscal 2006, diluted earnings per share is now expected to be in the range of approximately $1.90 to $2.04 per share. Excluding the charge related to the sale of the Pittsburgh Shop ‘n Save stores, earnings are now expected to be in the range of
$2.20 to $2.30, compared to the company’s previous guidance of $2.30 to $2.45.