Supervalu Lowers Profit Outlook As Price Cuts Fail To Boost Sales

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Supervalu Inc. reported a $202 million quarterly loss and cut its sales and full-year earnings forecasts for the third time in the past six months as price cuts and promotional spending failed to prop up the grocery chain’s sagging sales.

Identical-store sales in the 12-month period that began in March are expected to fall 6 percent, excluding fuel, from the previous year, Supervalu said in a statement today. In October, the Eden Prairie, Minn.-based company projected a 5.5 percent decline.

Supervalu has fared worse than most other major supermarket chains amid high unemployment and the economy’s slow recovery from recession. Budget-tightening consumers continue to seek bargains at discounters, such as Wal-Mart Stores, or at warehouse clubs, making it difficult for grocers to raise prices.

In the quarter ended Dec. 4, Supervalu’s fiscal 2011 third quarter, identical-store sales fell 4.9 percent. The sales reflect stores open four full quarters and are a key gauge of retailer performance.

Third-quarter sales “were softer than we had anticipated,” Craig Herkert, Supervalu’s chief executive officer, said in today’s statement. “We invested heavily in promotional activities that proved to be less than effective. As a result, it is prudent to take down our full-year guidance” for sales and earnings.

During the past two years, Supervalu closed or sold nearly 100 stores, and in early 2010 reduced the number of items offered per store. Supervalu hasn’t said how many fresh produce or meat offerings would be reduced, if at all.

“Our performance is still not close to my expectations and we continue to take action to change the trajectory of our businesses,” Herkert said in the statement. “Through our business transformation process, we will invest in price, leverage our buying power and enhance retail execution. These measures underscore our commitment to deliver everyday value to our customers.”

Additionally, Supervalu late last year agreed to sell a specialty grocery unit and its logistics and supply chain subsidiary to focus on core stores, which Albertsons, Cub Foods, Jewel-Osco and Save-A-Lot.

Still, Supervalu lagged competitors such as Kroger Co. and Safeway Inc. Kroger’s identical-store sales rose 2.4 percent in its most-recent quarter, excluding fuel, while Safeway’s fell 2 percent.

Supervalu’s quarterly loss of $202 million compares to net earnings of $109 million during the same period a year earlier. Net sales fell 6 percent, to $8.67 billion.

Also today, Supervalu lowered its adjusted 2011 earnings forecast to $1.25 to $1.35 per share from a previous estimate of $1.40 to $1.60.

In afternoon trading today, Supervalu shares fell 83 cents, or 9.6 percent, to $7.76. The stock fell 24 percent last year.

By Bruce Blythe, Business Editor, Vance Publishing Publishing



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


Mycogen® brand Silage-Specific™ Corn Hybrids

No other company has more experience with silage than Mycogen Seeds. Mycogen® brand TMF corn silage hybrids are bred specifically ... Read More

View all Products in this segment

View All Buyers Guides

)
Feedback Form
Leads to Insight