Grocer Supervalu reports 2nd-quarter loss

AP News
Posted: Oct 19, 2010 5:00 PM
Grocer Supervalu reports 2nd-quarter loss

Supervalu Inc. says the weak economy has hindered its turnaround efforts and that, along with a drop in the company's stock value, pushed the national grocery store operator to a second-quarter loss.

As it issued the disappointing results Tuesday, the company also lowered its outlook for the rest of its fiscal year, and its shares plunged.

Supervalu, which operates Albertsons, Jewel-Osco and other grocers, reported a steep loss of $1.47 billion, or $6.94 per share for the quarter. In the same period a year earlier, the company earned $74 million, or 35 cents per share.

Excluding a $1.5 billion charge to reflect the drop in Supervalu's stock value and $13 million for costs associated with a labor dispute, the company earned $59 million, or 28 cents per share.

The results fell short of analysts' average forecast for earnings of 29 cents per share and revenue of $8.74 billion, according to Thomson Reuters. Analysts typically exclude one-time items.

Supervalu, one of the poorer performers in its industry heading into the recession, has struggled to revamp its business. Like most grocers, it is trying balance customers' need for low prices against fluctuating food costs and intense competition.

The company brought in former Wal-Mart Stores Inc. executive Craig Herkert more than a year ago to lead a turnaround. The company has since put other new leaders in management, cut costs, lowered debt, tightened operations, increased marketing and sold or closed some stores. The company has also tried to put a heavier emphasis on lower prices, the key to winning today's shopper.

But Supervalu said those efforts aren't paying off as quickly as expected and said the tough economy and even tougher competition hurt its sales for the quarter.

The company said its third-quarter will be a "transition period" and results may not be seen until the end of its fiscal year for its efforts.

Supervalu CEO Herkert said while the quarter's results were disappointing, he remains committed to the strategy of improving operations and a focus on lower prices.

"We will be diligent and act with passion and sense of urgency, recognizing that this journey will take some time," he said.

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Investors questioned whether the company was overconfident in its ability to improve sales.

Revenue at stores open at least a year fell 6.5 percent in the second quarter. While Supervalu said the figure, considered a key gauge of a retailer's financial health, has improved in the first few weeks of this quarter, analysts worry the company may still be too optimistic.

Supervalu expects to report adjusted fiscal 2011 earnings of $1.40 to $1.60 per share, down from an earlier forecast of $1.75 to $1.95. Analysts are expecting $1.69 per share.

Hapoalim Securities analyst Ajay Jain called the cut to guidance "sobering" but necessary.

"Supervalu's turnaround efforts may be in a more critical state than we envisioned previously," Jain said in a note to investors.

Shares of the company, based in Eden Prairie, Minn., fell $1.86, or 15 percent, to $10.55.


Associated Press Retail Writer Mae Anderson contributed to this report from New York.