Supervalu Changes Focus as Retail Sales Slip--Update

By Imani Moise 

Shares of Supervalu Inc. slid 8.4% Wednesday as the company, which is shifting its focus from retail to wholesale, reported disappointing overall sales and lackluster wholesale revenue for the second quarter.

Same-store retail sales in the latest quarter fell 5.9% from a year ago, while wholesale revenue fell 5.5%. On a conference call to discuss its results, the company attributed the slump in sales to increased price deflation and more intense competition, adding that about two-thirds of its retail brands have been hurt by competition.

Monday the company announced it would sell its Save-A-Lot business, a discount grocery chain that has been a rare bright spot for the company, to a private-equity firm. The announcement reversed plans to spin off the chain into its own public company. SuperValu executives said on the call with analysts that the sale is expected to be dilutive, according to a transcript. Save-A-Lot same-store sales fell 5.2% in the latest quarter.

The pending divestiture means Supervalu will be mostly wholesale -- not retail -- focused, which could potentially result in better margins thanks to less exposure from the tough store sector.

Chief Executive Mark Gross said Wednesday that the Minnesota-based company would improve its wholesale revenue in the second half of the year "by adding new customers, securing long-term supply agreements with existing customers, and expanding overall product sales to all customers."

Supervalu also owns supermarket chains including Cub, Fresh Farm and Shop n' Save. The company has been stuck in a grocery middle ground as low-price, no-frills chains like Aldi have attracted cost-conscious customers and specialty chains led by Whole Foods Market Inc. have lured wealthier shoppers.

In all, Supervalu said earnings for the latest quarter were $31 million, flat with a year earlier. Per-share earnings came in at 12 cents, up a penny from a year ago on a slightly lower share count.

Excluding certain one-time gains and costs, per-share earnings were 10 cents. Revenue fell 4.8% to $3.87 billion.

Analysts polled by Thomson Reuters had forecast 10 cents a share in adjusted earnings on $3.95 billion in revenue.

Shares recently traded at $4.60 and have fallen 32% so far this year, including Wednesday's decline.

(END) Dow Jones Newswires

October 19, 2016 15:13 ET (19:13 GMT)

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