Supervalu said Wednesday that fourth-quarter identical-store sales were up 2.1% at Save-A-Lot and 0.2% at its more traditional supermarkets, helping drive net income of $26 million for the period.
Sales in the quarter, which ended Feb. 22, were up 1.4%, to $3.95 million. Net income from continuing operations totaled $40 million, after $8 million in one-time charges, compared with a loss from continuing operations of $174 million — including $149 million in one-time charges — in the year-ago fourth quarter. The reported loss in the year-ago period was $1.4 billion, which included more than $1.2 billion in losses from discontinued operations.
"Fiscal 2014 was an important transition year for Supervalu as we stabilized the organization and set the foundation for our future,” said president and CEO Sam Duncan in a statement.
In the company’s wholesaling division, sales were down 0.6%, to $1.82 billion, which Supervalu attributed primarily to the impact of losing two large customers and lower military sales, partially offset by net new business.
Fourth quarter Save-A-Lot net sales were $999 million, up 3.1%. ID sales for corporate stores within the Save-A-Lot network were up 3.5%. Operating earnings in the Save-A-Lot division were down about 12% compared with adjusted operating earnings a year ago, to $43 million, which Supervalu attributed in part to incremental price investments.
Supervalu said Save-A-Lot licensees have begun adopting some corporate programs into their stores, including new directional sign packages, more prominent displays of price investment items, and newly introduced horizontal merchandising sets. In a multi-store test with one large licensee group, Supervalu said it has “seen high single-digit sales increases after working with the Save-A-Lot team on store resets and improved store merchandising.”
Supervalu also said it is holding both its corporate stores and those of licensees to higher operating standards, and is taking back licensees’ stores that are not meeting those standards.
“We have seen great success with the changes made in both meat and produce, and I believe we still have upside as we further look at new merchandising opportunities and focus on even stronger in-store execution,” Duncan said in a conference call with analysts.
In addition, Save-A-Lot is “in the early stages” of developing a modular general merchandise program to supplement the grocery offering at Save-A-Lot, he said.
The chain expects to add 65 new stores this year, while closing 30 locations, and to accelerate new-store development in the coming years.
In the retail food division, which includes Supervalu’s own more traditional supermarkets, sales were $1.09 billion, up 0.2%. Adjusted operating earnings in that division more than doubled to $38 million, compared with adjusted operating income of $14 million a year ago. Supervalu attributed the gains primarily to cost reduction initiatives, including lower depreciation expense.
“After we rolled out the decentralized operating model in the first quarter, our banners moved through the second and third quarters, learning and refining the relationship between promotional investment, expected sales, and the appropriate levels of inventory,” Duncan said in the conference call. “We still have work to do in our retail segment, but our fourth-quarter results demonstrated the team's ability to develop promotional plans that create the desired customer behavior which we believe will help us drive sustainable sales growth in fiscal 2015.”
In addition, Supervalu is launching a new coupon-to-card program this week in its Cub Foods stores in Minnesota, which gives customers the ability to download digital coupons directly to their phone or their Cub Rewards card.
“This is another important step for us in the digital space, and we'll be watching and reviewing this program closely to determine how to leverage this capability across the rest of the company,” Duncan said.
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