Supervalu Earnings Reflect Strength Of Save-A-Lot Brand

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Supervalu on Thursday reported total sales of $5.23 billion in the first quarter of fiscal year 2015 vs. $5.24 billion in the same period a year ago. The Minneapolis-based company’s Save-A-Lot banner saw strong sales, while its independent business segment sales decreased 2.6 percent.

First quarter Save-A-Lot net sales were $1.35 billion vs, $1.27 billion last year, an increase of 6.5 percent. Identical store sales in the Save-A-Lot network were positive 5.6 percent. Identical store sales for corporate stores within the Save-A-Lot network were positive 7.2 percent.

Save-A-Lot operating earnings in the first quarter were $46 million, or 3.4 percent of net sales. Last year’s Save-A-Lot operating earnings in the first quarter were $52 million, or 4.1 percent of net sales, and included $5 million in pre-tax asset impairment charges and employee severance costs. When adjusted for these items, Save-A-Lot operating earnings in the first quarter of fiscal 2014 were $57 million, or 4.5 percent of net sales.

The company attributes the decrease in Save-A-Lot adjusted operating earnings to incremental investments to lower prices to customers offset in part by the benefits of cost reduction initiatives and higher sales volumes.

Identical store sales in the company’s retail food segment were positive 0.6 percent. First quarter net sales were flat at $1.43 billion vs. $1.43 billion last year. Retail food operating earnings in the first quarter were $30 million, or 2.1 percent of net sales.

Last year’s retail food operating earnings were $7 million, or 0.4 percent of net sales, and included $18 million in pre-tax asset impairment charges, employee severance costs and accelerated stock-based compensation charges. When adjusted for these items, retail food operating earnings in the first quarter of fiscal 2014 were $25 million, or 1.7 percent of net sales.

The company said the increase in retail food adjusted operating earnings was primarily driven by cost reduction initiatives and lower depreciation expense partly offset by incremental investments to lower prices to customers.

First quarter independent business net sales were $2.40 billion compared to $2.46 billion last year, a decrease of 2.6 percent. The company said the decrease was primarily due to lost accounts, including lower sales to one New Albertson’s Inc. banner that completed the transition to self-distribution, and lower military sales partially offset by net new business.

Independent business operating earnings in the first quarter were $66 million, or 2.8 percent of net sales, and included $1 million of pre-tax employee severance costs. When adjusted for this item, independent business operating earnings in the first quarter were $67 million, or 2.8 percent of net sales.

Last year’s independent business operating earnings in the first quarter were $55 million, or 2.3 percent of net sales, and included $14 million in pre-tax costs and charges primarily related to employee severance costs and accelerated stock-based compensation charges. When adjusted for these items, independent business operating earnings in the first quarter of fiscal 2014 were $69 million, or 2.8 percent of net sales.

Results for the first quarter of fiscal 2015 included $2 million in after-tax charges and costs for employee severance and debt financing activities.

When adjusted for these items, first quarter fiscal 2015 net earnings from continuing operations were $50 million ($0.18 per diluted share).

“Fiscal 2015 is off to a solid start across our business segments,” said Supervalu President and CEO Sam Duncan. “Our first quarter results reflect the investments we are making this year to position the company for future success and I am pleased with our operating performance.”

Gross profit for the first quarter was $752 million, or 14.4 percent of net sales. Last year’s first quarter gross profit was $795 million, or 15.2 percent of net sales.

Supervalu said the decrease in gross profit compared to last year was primarily driven by lower fees earned under the transition services agreement. The agreements include support services provided by Supervalu to Albertsons LLC and New Albertsons Inc. Fees earned under the transition services agreements in the first quarter were $58 million vs. $84 million last year.

Supervalu has annual sales of approximately $17 billion. It has a network of 3,320 stores composed of 1,805 independent stores serviced primarily by the company’s food distribution business; 1,325 Save-A-Lot stores, of which 931 are operated by licensee owners; and 190 traditional retail grocery stores (store counts as of June 14).

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