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SUPERVALU Beats Q1 Earnings; Plans Save-A-Lot Spin-Off - Analyst Blog

SUPERVALU Inc. 's SVU first-quarter fiscal 2016 earnings per share of 23 cents beat the Zacks Consensus Estimate of 20 cents by 15%. Also, earnings increased 28% from the year-ago quarter figure of 18 cents, backed by higher top line. Adjusted earnings exclude an after-tax charge of $2 million.

Revenues and Margins

SUPERVALU's total sales increased 3% year over year to $5.41 billion driven by positive identical store sales in the Save-A-Lot network and Independent business. Sales were in line with the Zacks Consensus Estimate.

Gross profit increased 7.3% to $810.0 million from the year-ago quarter. Gross margin inflated 60 basis points (bps) to 15.0% on the back of lower logistics costs and a shift in business mix.

Lower selling, general and administrative expenses led to 17% higher operating earnings to $158 million. Operating margin inflated 30 bps to 2.9% mainly due to lower net interest expenses.

Segment Details

Net sales at Retail Food increased 2.8% from the prior-year quarter to $1.47 billion contributed by the newly acquired stores. Same-store sales recorded 0.3% decline comparing unfavorably with 1.1% growth in the previous quarter. While customer accounts decreased 40 bps, average transaction size declined approximately 10 bps. Unanticipated headwind from static pharmacy reimbursement rates due to increase in generic drug costs lowered the identical store sales in the quarter. Operating margin inflated 10 bps to 2.2% due to lower depreciation and occupancy costs.

Net sales at the Save-A-Lot stores increased 3.8% year over year to $1.41 billion backed by strong sales in the meat and food products category. The segment recorded 0.6% positive same-store sales across the network. Same-store sales for corporate stores within the Save-A-Lot network were 60 bps backed by 4% increase in customer count and 2.6% rise in transaction size. Save-A-Lot's operating margin inflated 20 bps to 3.6% as a result of higher base margins and lower logistics cost.

Net sales at the Independent business gained 1.7% year over year to $2.46 billion. Higher sales to existing customers, including military, drove sales higher. The Independent business' operating margin gained 30 bps to 3.1% of sales.

Corporate

During the second quarter, corporate incurred $3 million operating loss, comparing favorably with $7 million loss last year.

Other Financial Update

Cash and cash equivalents of SUPERVALU totaled $137.0 million as of Jun 20, 2015, as against $114.0 million as of Feb 28, 2015. Long-term debt and capital lease obligations were $2.20 billion as of Jun 20, 2015 compared with $2.48 billion as of Feb 28, 2015.

Concurrent to its earnings conference call, SUPERVALU announced its plans to spin off the Save-A-Lot business into a standalone, publicly traded company.

Stocks to Consider

SUPERVALU currently carries a Zacks Rank #4 (Strong Sell). Some better-ranked stocks in the consumer staples sector are Cal-Maine Foods Inc. CALM , Post Holdings Inc. POST and Inventure Foods Inc. SNAK . While Cal-Maine Foods and Post Holdings sport a Zacks Rank #1 (Strong Buy), Inventure Foods has a Zacks Rank #2 (Buy).

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SUPERVALU INC (SVU): Free Stock Analysis Report

CAL-MAINE FOODS (CALM): Free Stock Analysis Report

POST HOLDINGS (POST): Free Stock Analysis Report

INVENTURE FOODS (SNAK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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