Supervalu Changes Focus as Retail Sales Slip--Update
October 19 2016 - 3:28PM
Dow Jones News
By Imani Moise
Shares of Supervalu Inc. slid 8.4% Wednesday as the company,
which is shifting its focus from retail to wholesale, reported
disappointing overall sales and lackluster wholesale revenue for
the second quarter.
Same-store retail sales in the latest quarter fell 5.9% from a
year ago, while wholesale revenue fell 5.5%. On a conference call
to discuss its results, the company attributed the slump in sales
to increased price deflation and more intense competition, adding
that about two-thirds of its retail brands have been hurt by
competition.
Monday the company announced it would sell its Save-A-Lot
business, a discount grocery chain that has been a rare bright spot
for the company, to a private-equity firm. The announcement
reversed plans to spin off the chain into its own public company.
SuperValu executives said on the call with analysts that the sale
is expected to be dilutive, according to a transcript. Save-A-Lot
same-store sales fell 5.2% in the latest quarter.
The pending divestiture means Supervalu will be mostly wholesale
-- not retail -- focused, which could potentially result in better
margins thanks to less exposure from the tough store sector.
Chief Executive Mark Gross said Wednesday that the
Minnesota-based company would improve its wholesale revenue in the
second half of the year "by adding new customers, securing
long-term supply agreements with existing customers, and expanding
overall product sales to all customers."
Supervalu also owns supermarket chains including Cub, Fresh Farm
and Shop n' Save. The company has been stuck in a grocery middle
ground as low-price, no-frills chains like Aldi have attracted
cost-conscious customers and specialty chains led by Whole Foods
Market Inc. have lured wealthier shoppers.
In all, Supervalu said earnings for the latest quarter were $31
million, flat with a year earlier. Per-share earnings came in at 12
cents, up a penny from a year ago on a slightly lower share
count.
Excluding certain one-time gains and costs, per-share earnings
were 10 cents. Revenue fell 4.8% to $3.87 billion.
Analysts polled by Thomson Reuters had forecast 10 cents a share
in adjusted earnings on $3.95 billion in revenue.
Shares recently traded at $4.60 and have fallen 32% so far this
year, including Wednesday's decline.
(END) Dow Jones Newswires
October 19, 2016 15:13 ET (19:13 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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