(RTTNews) - Grocery stores operator Supervalu Inc. (SVU: News ) reported Tuesday a 42.2% fall in second-quarter profit, hurt by lower sales and margins. However, quarterly earnings per share topped market projections, while top line missed Street view. Further, the Eden Prairie, Minnesota-based company revised its fiscal 2010 earnings forecast, and trimmed sales view, citing the economic outlook in the second half of the year. The company also announced a cut in quarterly dividend.

Second-quarter net income was $74 million or $0.35 per share, lower than prior year's net income of $128 million or $0.60 per share, which included one-time acquisition related costs of $2 million or $0.01 per share.

On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $0.33 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales decreased to $9.46 billion from $10.23 billion a year ago, and missed Wall Street analysts' consensus revenue estimate of $9.65 billion for the quarter.

Commenting on the results, Craig Herkert, Supervalu's chief executive officer and president, said, "Consumer purchasing behavior, deflationary pressures, as well as our decision to make meaningful investments in price and promotions significantly impacted our second quarter sales and margins. As a result, earnings were lower than the prior year, generally in line with our expectations, and slightly better than analysts' consensus of $0.33 per share as reported by First Call. Even as we have made these investments which resulted in pressure on our margins, I'm pleased that our total debt has been reduced $340 million since year end."
In the quarter, retail food net sales fell 6.9% year-over-year to $7.41 billion, primarily reflecting the impact of identical store sales of negative 4.8% and previously announced store closures. Second-quarter supply chain services net sales declined 9.5% to $2.05 billion, mainly reflecting the on-going transition of Target Corp. (TGT) volume to self-distribution.

Retail food net sales in the second quarter represented 78.3% of total net sales, compared to 77.9% last year, and supply chain services net sales represented 21.7% of net sales, compared to 22.1% a year ago.

According to the company, the identical store sales performance "primarily results from a challenging economic environment, heightened competitive activity, deflationary pressures and investments in price and promotions."

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