Supervalu Turns in Third-Quarter Loss

Earnings decline but are still above consensus estimates.
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Hurt by goodwill and intangible asset impairment charges of $3.25 billion, Grocery retailer

Supervalu

(SVU)

reported on Jan. 7, 2008, a net loss for third-quarter fiscal 2009. The company swung to a net loss of $2.94 billion or $13.95 per share from a year earlier profit of $141 million or 66 cents per share.

Excluding noncash impairment charges, earnings declined to $132 million or 62 cents per share from $148 million or 69 cents per share a year ago. The latest quarterly earnings beat the consensus estimate of 60 cents per share.

The company's net sales for third-quarter 2009 decreased marginally to $10.17 billion from $10.21 billion in the prior-year quarter, hurt by lower revenue in its supply chain services division. Segment-wise, retail food sales, accounting for 77.3% of total revenue, were relatively flat at $7.86 billion as new store growth was offset by the effect of store closures and negative identical store sales of 0.5%.

Moreover, retail square footage decreased 0.3% from the corresponding period last year due to the closure of underperforming stores. Excluding store closures, total retail square footage ascended 2.0% over third-quarter 2008. On the other hand, revenue from supply chain services fell 1.8% to $2.31 billion, led by the ongoing transition of

Target

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volume to self-distribution and customer attrition partially offset by the pass-through of inflation and new business growth.

For third-quarter 2009, gross profit margin improved 19 basis points to 22.42%, whereas operating margin deteriorated to -28.42% from a positive 3.87% a year ago due to higher selling and administrative expenses and impairment charges.

Going forward, SVU lowered its 2009 non-GAAP EPS guidance to a range of $2.80 to $2.90 from its earlier guidance of $2.90 to $3.00 per share. The company expects revenue of $45 billion and identical sales growth of negative 1.0% during 2009. Furthermore, SVU announced its fiscal 2010 capital spending plan of $850 million and debt reduction goal of $600 million.

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