SUPERVALU Inc (SVU) reported results for the third quarter of fiscal 2010 with earnings of 51 cents per share. Earnings were above the Zacks Consensus Estimate of 48 cents, but were 17.7% below the prior-year quarter.
Net sales for the quarter declined 9.4% year-over-year to $9.2 billion primarily due to declines in the Retail Food segment and Supply Chain Services segment. Net sales in the Retail Food segment were down 9.4% to $7.1 billion due to a 6.5% negative impact from the same-store sales, the exit from the Salt Lake City Retail market and previously announced store closures.
Net sales in the Supply Chain services segment declined 8.7% year-over-year to $2.1 billion. The decline was due to the impact of the previously announced plans by Target (TGT) to transition some of the volume to self-distribution.
Total retail square footage at the end of the third quarter was approximately $67 million, reflecting a 5.3% decline from the third quarter of fiscal 2009.
Gross margin for the quarter was almost flat year-over-year, declining marginally by 7 basis points (bps) to 22.3%, as benefits from pricing and promotional activities were offset by a lower LIFO (Last-In, First-Out) charge.
The company reported an operating profit of $308 million as compared to an operating loss of $2.9 million in the prior-year quarter.
Interest expense for the third quarter was reduced by 8.4% to $131 million compared to $143 million last year, reflecting lower interest rates and reduced borrowing levels.
Net cash flows from operating activities year-to-date were $798 million compared to $1.1 billion in the prior year. Capital expenditures year-to-date reached $555 million.
Based on the third quarter results, management reaffirmed guidance for fiscal 2010. Identical store sales are now expected to be approximately negative 5% for the year. Earnings for fiscal 2010 are expected to be in the range of $1.95 to $2.05 per share on a GAAP basis and $2.01 to $2.11 on an adjusted basis, when excluding costs related primarily to store closures.
Management also announced guidance for capital spending for fiscal 2011. The company intends to spend approximately $700 million on capital items. The expenses include in-store merchandising initiatives for about 300 stores. Additionally, the capital expenditure guidance also includes 60 to 75 major store remodels, 30 to 40 minor store remodels, two replacement stores and approximately 100 hard discount stores, including licensed locations.
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