) posted third quarter fiscal 2013 adjusted earnings per share of
3 cents, lower than the Zacks Consensus Estimate of 6 cents and
the comparable prior-year quarter earnings of 24 cents a
The adjusted earnings excludes $26 million worth of after-tax
gains related to a cash settlement received from credit card
companies, partially offset by $15 million in net after-tax
charges related to previously announced store closures.
The lower-than-expected results were due to the disappointing
same store sales during the quarter and reduced discretionary
spending by consumers in the U.S. due to ongoing economic
Revenues and Margins
Supervalu's total sales dipped 5.0% to $7.9 billion from $8.3
billion in the year-ago quarter. The reported revenues also
missed the Zacks Consensus Revenue Estimate of $10.9 billion.
Lower customer spending due to ongoing economic challenges, as
well as aggressive pricing by competitors negatively impacted
The gross margin contracted 50 basis points (bps) to 21.2% in
the third quarter of fiscal 2013 on account of higher advertising
spending, investment in the fair price plus promotion strategy
and changes in the business segment mix.
Net sales at
declined 7.4% to $4.96 billion in the third quarter of fiscal
2013, as compared with $5.36 billion in the comparable prior-year
quarter. Results were impacted by a same-store sales decline of
4.5%, store closures and sale of fuel centers. The Retail food
operating margin declined 40 bps in the reported quarter to 1.3%
due to advertising expense and the impact of sales deleveraging,
partially offset by the company's cost reduction initiatives.
Net sales at
dipped 1.6% to $966.0 million compared with $982.0 million in the
year ago quarter. The decline was due to negative identical store
sales of 4.1% and recent store closures. The Save-A-Lot operating
margin declined 220 basis points in the reported quarter to 3.9%
due to negative same store sales during the quarter and increase
in administrative costs
Net sales at
remained flat at $1.99 billion in the third quarter of fiscal
2013 compared to the year-ago level. Lower spending by the
existing customers hurt sales in this segment. The Independent
business operating margin declined 80 bps to 2.5% due to tough
Other Financial Update
Cash and Cash equivalents of Supervalu were $155.0 million as
of December 1, 2012, versus $157.0 million as of February 25,
2012. Long-term debt and capital lease obligations as of December
1, 2012, were $6.2 billion, compared with $5.9 billion as of
February 25, 2012.
Sellout of Supermarkets as Part of Strategic
Supervalu has entered into a definitive agreement to sell out
877 supermarkets under its five supermarket chains to Cerberus
Capital Management LP for $3.3 billion. The sale includes stores
from the Albertsons, Acme, Jewel-Osco, Shaw's and Star Market
chains as well as in-store pharmacies under \Osco and Sav-on. The
sale is expected to close by the end of March 2013.
We believe that the economic slowdown is causing headwinds for
Supervalu as well as its peers. Further, low disposable income of
consumers is forcing these companies to spend cautiously.
Moreover, the Food and Drug Administration is becoming more
vigilant regarding food and health standards due to the
increasing awareness among consumers. Increased caution on
account of health concerns is affecting demand.
Supervalu operates in a highly competitive market. Moreover,
labor unions that have caused havocs at retail chains like
) could also affect labor relations at Supervalu.
Currently, Supervalu has a Zacks Rank #4 (Sell), so we are not
recommending the shares. You could instead consider investment in
The Kroger Co.
Marks & Spencer
Whole Foods Market
) that carry a Zacks Rank #2 (Buy).
KROGER CO (KR): Free Stock Analysis Report
(MAKSY): ETF Research Reports
SUPERVALU INC (SVU): Free Stock Analysis
WHOLE FOODS MKT (WFM): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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