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Supervalu Profit Falls, Albertsons Deal on Track
April 18, 2006 · Reuters
Supervalu Inc. which is set to buy most of Albertsons Inc.'s grocery operations, posted a lower quarterly profit on Tuesday, dragged down by charges related to selling some operations and costs to improve its supply chain.
Profit in the fiscal fourth quarter ended Feb. 25 fell to $6.0 million, or 4 cents per share, from $92.9 million, or 65 cents a share, a year earlier.
The results in the most recent quarter include 51 cents per share in charges stemming from the sale of Cub Foods stores in Chicago, asset impairment and other items.
Analysts, on average, expected Supervalu to earn 56 cents a share, according to Reuters Estimates.
"As expected, it was a messy quarter," said Morningstar analyst Mitchell Corwin, who said people are more focused on the impending Albertsons acquisition rather than quarterly results. "Retail was expected to be fairly weak, maybe there was a little more weakness in the supply chain services than investors had expected."
Minneapolis-based Supervalu has 1,381 grocery stores under names such as Save-A-Lot and distributes products to other grocers around the country. In January, it agreed to buy some of Albertsons' grocery operations and the deal is on track to close in June, it said.
Chairman and Chief Executive Jeff Noddle said in a statement that he is finalizing the executive leadership of the combined company and plans to announce it in early May. He hopes to give full year financial guidance by mid-May.
Once the acquisition is completed, Supervalu will have about 2,500 stores and $44 billion in annual revenue, making it the third-largest U.S. supermarket chain behind Wal-Mart Stores Inc. and Kroger Co.
Net sales in the fourth quarter rose to $4.64 billion from $4.59 billion, but fell short of analysts' average forecast of just over $4.7 billion.
Sales at Supervalu's retail stores slipped to $2.53 billion from $2.55 billion, due mainly to stores being sold or closed, as well as soft sales at stores open at least a year, which offset sales growth at new stores.
Comparable store sales fell 1.1 percent in the quarter.
Sales in the supply chain services segment rose 3.7 percent to $2.11 billion. But the division's operating earnings fell to $41.4 million from $59.4 million, weighed down by losses related to minority-owned investments and costs related to growth plans.
Shares of Supervalu closed at $29.31 on Monday. The shares have fallen nearly 14 percent since Jan. 23, when the Albertsons deal was announced