Grocery stores operator Supervalu Inc. (SVU) on Tuesday posted a profit for the third quarter reflecting the benefit of stabilizing margins and better controls over expenses. Further, the company affirmed its fiscal 2010 forecast.
The Eden Prairie, Minnesota-based company's third-quarter net income was $109 million or $0.51 per share, compared to a loss of $2.94 billion or $13.95 per share in the year-ago period.
The company noted that the latest quarter results included non-cash goodwill and intangible asset impairment charges of $3.3 billion pre-tax or $3.1 billion after-tax, or $14.57 per share.
Excluding non-cash impairment charges, the latest quarter net income amounted to $132 million or $0.62 per share.
On average, 16 analysts polled by Thomson Reuters expected the company to earn $0.40 per share for the quarter. Analysts estimates typically exclude special items.
Quarterly net sales declined to $9.22 billion from the previous year's sales of $10.2 billion, and fell shy of the thirteen Wall Street analysts' consensus revenue estimate of $9.43 billion.
Retail food net sales for the most recent quarter dropped 9.4% to $7.1 billion from $7.9 billion in the year-earlier quarter, largely reflecting the impact of negative 6.5% identical store sales, the Salt Lake City retail market exit and previously announced store closures. The identical store sales performance was driven by a challenging economic environment, heightened competitive activity, and deflationary pressures, the company added.
Total retail square footage at the end of the third quarter was about 67 million, down 5.3% from the previous year. Excluding the Salt Lake City market exit and other store closures, total retail square footage edged up 0.5% over last year.
Supply chain services net sales totaled $2.1 billion, a decline of 9.2%, compared to $2.3 billion last year, primarily due to the completion of Target's previously announced plans to transition certain volume to self-distribution.
Craig Herkert, chief executive officer and president of Supervalu commented, "I am pleased to report earnings in line with our expectations. Sales were softer than we had anticipated, but earnings per share, even before the impact from the Salt Lake City retail market exit, beat First Call consensus."
For the nine-month period ended December 5, 2009, the company reported net income of $296 million or $1.39 per share, compared to a loss of $2.65 billion or $12.56 per share in the prior-year period.
Year-to-date sales dropped to $31.4 billion from $33.7 billion reported in the comparable period of the previous year.
Looking forward, the company still expects fiscal 2010 earnings to range between $1.95 and $2.05 per share, and adjusted earnings in the range of $2.01 - $2.11 per share. Adjusted earnings projection excludes costs related primarily to store closures. Net sales for the full year are still projected to be about $41 billion. Wall Street analysts have a consensus earnings estimate of $1.86 per share on revenues of $41.22 billion for fiscal 2010.
Meanwhile, Supervalu said it currently forecasts identical store sales to be about negative 5% percent for the year compared to the previously communicated outlook of about negative 4%.
Supervalu expects sales in the traditional food distribution business to decline about 9%, primarily reflecting the completion of Target's transition plans. The company added that the prior announced store closure and cost mitigation activities would total about $20 million in pre-tax charges, or $0.06 per share.
Full-year impact of the Salt Lake City market exit is expected to be a pre-tax gain of about $3 million, or $0.01 per share, effective tax rate is estimated to be about 38.6% and capital spending is projected to be about $700 million, which would include 65 - 70 major store remodels, 25 - 30 minor remodels, three new traditional supermarkets and 45 - 50 new hard discount stores, including licensed stores. Further, debt reduction is estimated to be about $700 million.
While commenting on fiscal 2010 guidance, Herkert stated, "We are on track to deliver our earnings guidance. Sales remain under pressure and, with our focus on margins and expense management, we are countering the underperformance on the top line."
Moreover, Supervalu announced its fiscal 2011 capital spending plan of about $700 million, which also includes in-store merchandising initiatives benefiting more than 300 stores. Additionally, store development plans include 60 - 75 major store remodels, 30 - 40 minor store remodels, two replacement stores and about 100 hard discount stores, including licensed locations.
Among other players in the field, Safeway Inc. (SWY) earned $128.8 million or $0.31 per share for the third quarter, down from the prior-year's income of $199.7 million or $0.46 per share, reflecting lower fuel sales and a decline in identical-store sales as well as Canadian exchange rate. Quarterly sales and other revenue decreased 7.0% to $9.46 billion from $10.2 billion in the previous year.
Another peer, Kroger Co. (KR) incurred a third-quarter net loss of $874.9 million or $1.35 per share, compared to a profit of $237.7 million or $0.36 per share in the prior-year period. However, total sales, including fuel, in the third quarter were $17.7 billion, up from the previous year's sales of $17.6 billion. Excluding fuel sales, total sales improved 2.2% over the prior year.
In addition, Kroger lowered its fiscal 2009 earnings forecast to a range of $1.60 - $1.70 per share, from its prior issued forecast range of $1.90 - $2.00 per share. This guidance excludes the southern California impairment charges recorded in the third quarter.
Supervalu shares, which have been trading between $12.13 and $20.38 in the past 52 weeks, closed Monday's trading session at $12.92, up 5 cents or 0.39%, on a volume of $4.52 million shares. In the pre-market session, the stock is currently trading at $13.98, up $1.06 or 8.20%.
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