Supervalu Inc. (SVU), one of the largest grocery chains in the United States, delivered higher-than-expected fourth quarter 2011 earnings. The quarterly earnings of 44 cents a share plunged 4.3% from 46 cents posted in the year-ago period. The quarterly earnings also surpassed the Zacks Consensus Estimate of 34 cents. For full year 2011 Supervalu reported a loss of $7.13 per share, compared to earnings of $1.86 a year ago. It missed the Zacks Consensus Estimate of $1.29.
Supervalu which competes with Walmart Stores Inc. (WMT) expects fiscal 2012 GAAP earnings to be in the range of $1.20 to $1.40. Management feels that the company is aligned and working toward the common goal of delivering greater value to its customers.
Supervalu approaches fiscal 2012 with momentum, a solid plan and new capabilities to drive its business transformation, invest in price and deliver sequential improvement. The guidance of the company is in line with the Zacks Consensus Estimate of $1.17.
Revenue and Margins
Supervalu’s total sales dipped 5.9% to $8,660 million in the quarter, compared with $9,205 million in the prior-year period. The reported revenue surpassed of the Zacks Consensus Estimate of $8,751 million.
For fiscal 2011, total sales were $37,534 million, 7.5% lower than the net sales of $40,597 million reported a year ago. Net sales in the fiscal year 2011 missed the Zacks Consensus Estimate of $37,583 million.
Supervalu’s gross margin in the fourth quarter was $2.02 billion, or 23.3 % of net sales, compared to $2.16 billion, or 23.4% of net sales a year ago.
Segment Details
Net sales at Retail Food (77.3% of the total sales in the quarter) slipped 7.1% to $6,694 million in the quarter compared to $7,206 million in the prior-year quarter. Results followed an identical store sales decline of 5.0% and the adverse impact of retail market exits.
For fiscal year 2011, net sales at Retail Food (77.0% of the total sales in the quarter) slipped 8.6% to $28,911 million in the quarter compared to $31,637 million in the prior-year quarter.
Retail square footage dipped 1.7% year over year in the quarter. However, excluding the impact of market exits and store closures, retail square footage grew marginally by 1.7% in the quarter.
Net sales at Supply Chain Services (22.7% of the total sales in the quarter) dipped 1.6% to $1,966 million in the quarter compared with $1,999 million in the prior-year quarter.
For fiscal year 2011, net sales at Supply Chain Services (23.0% of the total sales in the quarter) dipped 3.8% to $8,623 million in the quarter compared with $8,960 million in the prior-year quarter.
Other Financial Update
Supervalu exited the quarter with cash and cash equivalents of $172 million, and long-term debt and capital lease obligations of $6,348 million with shareholders’ equity of $1,340 million. The company plans to reduce debt by $500 to $550 million in fiscal 2012.
The company’s cash flow from operations was $1,163 million year-to-date, up compared with $1,474 million in the prior year, demonstrating higher earnings.
Supervalu spent $604 million in the quarter versus $691 million in the prior year. In the fiscal year under review, the company carried out store remodeling activity, technology expenditures and new retail stores.
The company forecasted capital expenditure of $700 to $750 million for fiscal 2012, which includes 55 to 75 store remodels and 210 hard-discount stores, including licensed locations; no new traditional retail supermarkets are planned for fiscal 2012.
Based in Eden Prairie, Minnesota Supervalu’s shares maintain a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation. Currently we maintain an ‘Underperform’ rating on the Stock.
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