Last updated on April 29th, 2013 at 04:27 pm
Supervalu Inc. has reported fourth quarter fiscal 2013 net sales of $3.89 billion and a net loss of $1.41 billion, or $6.65 per diluted share. Due to the sale of the Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market stores and related Osco and Sav-On in-store pharmacies on March 21, those banners’ results were presented as discontinued operations for all periods.
Net loss from continuing operations for the fourth quarter of fiscal 2013 was $179 million, or $0.85 per diluted share, and included $149 million in after-tax charges, or $0.71 per diluted share, primarily related to non-cash asset impairment charges and employee severance. When adjusted for these charges, the fourth quarter fiscal 2013 loss from continuing operations was $30 million, or $0.14 per diluted share. In the fourth quarter of fiscal 2012, the net loss from continuing operations was $42 million, or $0.20 per diluted share, and included $47 million in after-tax charges, or $0.22 per diluted share, primarily related to non-cash asset impairment charges and employee severance. When adjusted for these charges, fourth quarter fiscal 2012 earnings from continuing operations were $5 million, or $0.02 per diluted share.
“This past quarter was largely about transitioning the company for the future, and I am proud of the many things we accomplished in my first 60 days,” said Sam Duncan, Supervalu’s president and CEO. Wednesday’s conference call to announce the fourth quarter fiscal 2013 results was Duncan’s first as president and CEO. “I brought in Ritchie Casteel as Save-A-Lot’s new president and CEO, and he has already right-sized that organization’s overhead and, along with me, met with a number of licensees to understand what we can do to help drive sales and improve the overall operating model.
“In the independent business, I am very pleased that Janel Haugarth will continue to lead this very important part of our company and am especially grateful for the support we have received from our retailers. I have talked and visited with a number of them and we have established a new National Retailer Advisory Group to facilitate feedback and information sharing.”
Commenting on the retail food segment, Duncan added, “Our banner presidents and their leadership teams are in place and have begun to execute on our decentralized model, with greater autonomy and accountability. They are energized by this change and excited to drive sales and cash in their stores.
“We have taken the necessary steps to right-size our corporate overhead and move specific responsibilities into our business segments. Simplifying our technology needs is an important part of the strategy going forward, and Randy Burdick, our new executive vice president, chief information officer, has a proven history of success that he brings to Supervalu. Also key to the management team as we strive to improve our fresh offerings and drive private label growth are Mark Van Buskirk, executive vice president, merchandising, marketing and pharmacy, and Steve Fox, senior vice president, food merchandising.
“My focus now is on the customer and driving sales increases in all our business units. I am excited to be leading this company and believe that operating results can be improved.”
4Q results—continuing operations
Fourth quarter net sales were $3.89 billion compared to $3.98 billion last year, a decline of 2.3 percent. The decrease in net sales primarily reflects a decline in identical store sales of negative 4.1 percent for retail food and negative 2.6 percent for Save-A-Lot network identical store sales.
Gross profit margin for the fourth quarter was $548 million, or 14.1 percent of net sales, compared to $572 million, or 14.4 percent of net sales last year. The decrease in gross margin as a percent of net sales reflects investment in competitive pricing partially offset by lower promotional spending.
Selling and administrative expenses in the fourth quarter were $759 million, or 19.5 percent of net sales, and included $238 million in charges primarily related to non-cash asset impairments and employee severance. Excluding these items, selling and administrative expenses in the fourth quarter were $521 million, or 13.4 percent of net sales. Selling and administrative expenses in the fourth quarter of fiscal 2012 were $544 million, or 13.7 percent of net sales, and included $15 million in employee severance costs. Excluding these items, selling and administrative expenses in the fourth quarter of fiscal 2012 were $529 million, or 13.3 percent of net sales.
Net interest expense for the fourth quarter was $59 million compared to $57 million last year.
Supervalu’s income tax benefit was $97 million, or 35.1 percent of pre-tax loss, for the fourth quarter, compared to an income tax benefit of $25 million, or 37.3 percent of pre-tax loss in last year’s fourth quarter. The income tax benefit for both fiscal years reflects the loss from continuing operations.
Retail food
Fourth quarter retail food net sales were $1.09 billion compared to $1.14 billion last year, a decline of 4.4 percent, primarily reflecting identical store sales of negative 4.1 percent driven by competitive pressures in certain markets and a lower level of promotional spending.
Retail food operating loss was $238 million, or 21.9 percent of net sales, and included $207 million in pre-tax charges primarily related to non-cash asset impairments. Excluding these charges, retail food operating loss was $31 million, or 2.8 percent of net sales. Last year’s retail food operating loss was $90 million, or 7.9 percent of net sales, and included $48 million in charges primarily related to non-cash asset impairments and employee severance. Excluding these charges, last year’s retail food operating loss was $42 million, or 3.6 percent of net sales. The improvement in retail food operating loss as a percent of net sales, excluding these charges, was driven by the benefit from the company’s cost-cutting initiatives, which were partially offset by the deleveraging impact of negative identical store sales.
Save-A-Lot
Fourth quarter Save-A-Lot net sales were $969 million compared to $984 million last year, a decrease of 1.5 percent, reflecting the impact from network identical store sales of negative 2.6 percent partially offset by the benefit from net new store openings.
Save-A-Lot operating earnings in the fourth quarter were $41 million, or 4.3 percent of net sales, and included $8 million in pre-tax non-cash asset impairment charges. Excluding these costs, Save-A-Lot operating earnings were $49 million, or 5.1 percent of net sales, compared to $54 million, or 5.5 percent last year. The decline in operating earnings as a percent of net sales was primarily due to lower gross margin rates attributable to competitive price investments and the deleveraging impact of negative identical store sales.
Independent business
Fourth quarter independent business net sales of $1.83 billion reflects a lower level of new business during the quarter, which resulted from a challenging affiliation environment since the company announced it would review strategic alternatives.
Independent business operating earnings in the fourth quarter were $25 million, or 1.4 percent of net sales, and included $22 million in pre-tax non-cash asset impairment charges and employee severance. Excluding these costs, independent business operating earnings in the fourth quarter were $47 million, or 2.6 percent of net sales. Independent business operating earnings in the fourth quarter of fiscal 2012 were $43 million, or 2.3 percent of net sales, and included $5 million in pre-tax charges for employee severance. Excluding these costs, independent business operating earnings in the fourth quarter of fiscal 2012 were $48 million, or 2.6 percent of net sales.
Fiscal 2013 results—continuing operations
The company reported full-year net sales of $17.1 billion and a net loss from continuing operations of $263 million, or $1.24 per diluted share, which included $187 million in after-tax charges, or $0.88 per diluted share, primarily related to non-cash asset impairments, employee related costs and store closure expenses. When adjusted for these charges, net loss from continuing operations in fiscal 2013 was $76 million, or $0.36 per diluted share. Full year identical store sales for retail food were negative 2.4 percent. Full year Save-A-Lot network identical store sales were negative 3.3 percent.
For fiscal 2013 and fiscal 2012, diluted loss per share is computed using the basic weighted-average number of shares outstanding and excludes all outstanding stock options and restricted stock as their effect is anti-dilutive when applied to losses.
Cash flows
Fiscal 2013 net cash flows from operating activities were $417 million compared to $328 million in the prior year, reflecting lower levels of working capital.
Transaction update—discontinued operations
On Jan. 10, the Eden Prairie, Minn.-based company announced it had reached a definitive agreement for the sale of five retail grocery banners (Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market). This transaction was completed March 21. The results from these banners are presented as discontinued operations for all periods and include the operating results and charges related to these stores.
