MINNEAPOLIS -- Supervalu here said last year's asset swap with C&S Wholesale Grocers resulted in a sales decline of about $100 million for the second quarter ended Sept. 11, but net income rose 26.2% compared with the year-ago period.
Jeff Noddle, chairman, president and chief executive officer, pointed out that gross margins improved since the swap, "and we hope we can find more opportunities like that, though nothing is imminent."
The exchange involved a swap of Supervalu's New England business for the former Fleming business in the Midwest that C&S had acquired when Fleming liquidated its wholesale assets.
In a conference call with industry analysts last week to discuss the company's financial results, Noddle said the $100 million drop was somewhat higher than Supervalu had anticipated.
"We knew we were giving up more than we took back, but distribution is always a series of gains and losses, and attrition is a continuing issue we address," he pointed out.
He said Supervalu expects attrition for the year to reach about 4%, at the high end of its historical 2% to 4% annual attrition rate.
Overall sales at Supervalu declined 2.3% to $4.5 billion for the 12-week second quarter and 0.3% to $10.4 billion for the half, while net income rose 26.2% to $78.5 million for the quarter and 67.7% to $227.9 million for the half.
In Supervalu's food distribution segment, sales fell 7% for the quarter and 5% for the year to date due to the asset swap, customer attrition and the company's exit from Denver last fall, which the company said offset new business gains; operating earnings in the food distribution segment rose 11.2% in the quarter and 9.5% in the half.
In the retail food segment, sales rose 2.1% in the quarter and 4.2% in the half, with comparable-store sales down 0.2% in the quarter -- reflecting in-market store expansion, competitive activities in certain markets, and the sluggish economy, the company said; operating earnings rose 6.4% in the quarter and 5.2% for the year to date.
Pam Knous, executive vice president and chief financial officer, said earnings for the year will probably be at the top of the range of $2.80 to $2.90 per share.
During the quarter, Supervalu opened 110 new extreme-value combination stores, which combine Save-A-Lot grocery offerings with general merchandise from Deal$-Nothing Below a Dollar, and converted 90 company-owned stores to the combination format.