Supervalu Shares Up After Loss

Wall Street had a generally positive reaction last week to year-end financial results from Supervalu here. For John Heinbockel, an analyst with Goldman Sachs, New York, operating income beat most expectations by $10 million to $15 million, even stripping out Albertsons' merger synergies, which were also better than expected, he noted. When adjusted for a shift of Thanksgiving into the

MINNEAPOLIS — Wall Street had a generally positive reaction last week to year-end financial results from Supervalu here.

For John Heinbockel, an analyst with Goldman Sachs, New York, operating income beat most expectations by $10 million to $15 million, “even stripping out Albertsons' merger synergies, which were also better than expected,” he noted.

When adjusted for a shift of Thanksgiving into the third quarter, identical-store sales in the company's retail segment were down 1.2%, “in line with the prior two quarters despite moderating inflation, which is evidence of stability,” he pointed out, while earnings per share — excluding the extra week in the 53-week year — were up 8 cents, which exceeded Wall Street's expectations, Heinbockel said.

Supervalu also raised its full-year debt reduction target by $100 million to $700 million by reducing capital expenditures to $750 million, from $850 million, “which should further reduce any lingering liquidity concerns,” he said.

In a conference call last week to discuss results for the year and fourth quarter that ended Feb. 28, Supervalu said it has been satisfied enough with the merchandising and marketing initiatives it introduced at Acme Markets in Philadelphia in late February to expand that effort to its Jewel stores in Chicago this month, with plans to convert Cub, Farm Fresh, Shaw's and Albertsons-banner stores by next February.

Jeff Noddle, chairman and chief executive officer, said the new programs will involve a rebalancing of promotions, including more efforts on target-marketing, “[so that] every dollar [spent] should give us more impact on sales.”

Pricing will be a key component of the program, he said, noting that Supervalu is confident its efforts will be effective because of data-mining programs “[that] give us a much stronger understanding of how an item's movement will respond to changes in price.”

For the fiscal year, Supervalu had a loss of $2.9 billion — resulting from impairment charges related to new accounting standards; costs related to store closures; settlement costs from a pre-acquisition Albertsons matter; and one-time acquisition-related costs — compared with net earnings a year ago, while sales rose 1.2% to $44.6 billion. For the fourth quarter the loss was $201 million, compared with net earnings last year, while sales increased 4.2% to $10.8 billion.

Q4 RESULTS
Qtr Ended 2/28/09 2/23/08
Sales $10.8B $10.4B
Change +4.2%
Comp-store* -2.0%
Net Income ($201M) $156M
Inc./Share (95 cents) 73 cents
53 Weeks
Sales $44.6B $44.1B
Change +1.2%
Comp-store* Not available
Net Income ($2.9B) $593M
Inc./Share ($13.51) $2.80
* REFLECTS IDENTICAL-STORE SALES FOR SUPERVALU'S RETAIL SEGMENT ONLY.