Supervalu Inc. (SVU), one of the world’s leaders in grocery retail and supply chain operations, is scheduled to report its first-quarter 2012 financial results on Tuesday, July 26, 2011. The current Zacks Consensus Estimate for the quarter is pegged at 33 cents a share. The Zacks Consensus Estimate projects revenues for the quarter to be $13,924 million.
Fourth Quarter 2011 Recap
Supervalu, which faces stiff competition from Wal-Mart Stores Inc. (WMT), The Kroger Co. (KR) and Safeway Inc. (SWY), posted poor results for the fourth quarter of 2011 as earnings sank by two pennies year-over-year to 44 cents per share. However, EPS surpassed the Zacks Consensus Estimate of 34 cents per share by 29.41%. Earnings were primarily impacted by transformation initiatives taken up by the company to increase traffic in its stores.
Net sales shrank 5.43% to $8.7 billion in the quarter from $9.2 billion in prior-year quarter, demonstrating decline in retail segment. Total retail square footage, excluding store closures and market exits, increased 1.7% over the fourth quarter of fiscal 2010.
Management Guidance
Management expects the proforma earnings per share to be within $1.20 to $1.40 per share. The current Zacks Consensus Estimate for fiscal 2011 is $1.23.
First-Quarter 2011 Zacks Consensus
Earnings estimates for the first quarter of 2011, as provided by the analysts, range from a low of 29 cents to a high of 35 cents. Thus, the current Zacks Consensus Estimate for the quarter is pegged at 33 cents per share, reflecting a year-over-year decline of 21.4%.
Over the past 30 days, one analyst revised the earnings estimate downward and thus the current Zacks Consensus Estimate inched down by a penny to 33 cents. However, with no analysts making any revision to their estimates in the last 7 days, the Zacks Consensus Estimate remained the same.
Earnings History Outpaces Zacks
With respect to earnings surprises, Supervalu has topped the Zacks Consensus Estimate in two of the preceding four quarters. Over the last four quarters, the earnings surprise ranged from a negative of 22.58% to a positive of 29.41%, with the average earnings surprise being a positive 1.44%, suggesting that Supervalu has outperformed the Zacks Consensus Estimate by that measure.
Recommendation
Supervalu operates in a highly competitive market. Moreover, unionized labor force of the company has inherent risks and potential labor related issues remain a concern.
Currently, we prefer to rate the stock as Underperform. Further, Supervalu holds the Zacks #4 Rank, which translates into a short-term ‘Sell’ rating.
