The information presented and discussed today includes forward-looking statements which are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The risks and uncertainties related to such statements are detailed in our most recent 10-K filing. A replay of today’s call will be available on our website at www.SuperValu.com.I will now turn the call over to Craig Herkert. Craig Herkert Thank you, Ken, and good morning everybody. As you read in today’s release, SuperValu reported earnings per share of $0.24 for the third quarter, excluding the impact of a number of one-time items. Our results this quarter are not indicative of the earning power you should expect from our Company. Our shortfall was driven largely by disappointing trends in sales and margin. Our identical store sales of negative 4.9% came in well under plan. The largest headwind came from our northeast banners which, as a group, pulled down corporate IDs by more than 150 basis points in the third quarter. While this was an improvement on a sequential quarter basis, these banners were generally in the negative high single digits. Shaw’s, Acme and Shoppers continue to see strong price competition in each of their markets. Chicago was another market that continues to see heightened competitive activity. The entry of more discounters has pressured Jewel IDs, which were just slightly above our overall corporate ID sales rate. Our IDs in all other banners as a group improved almost 200 basis points from quarter two, particularly in the west and at Save-A-Lot. At these banners, we believe our progress was a result of improved marketing, customer engagement, and price investments. With regard to margin, we invested more heavily in promotional activities and continued to make investment in price. Both actions drove basket size at the expense of gross margin. In general, we introduced well-planned holiday programs early in the quarter to capture customers’ attention. However, we executed some ineffective price promotions in other categories such as carbonated beverages, soups and frozen foods which did not drive incremental traffic. Overall, our items sold on promotion were 50 basis points higher than a year earlier and failed to drive profitable margin dollars.
My leadership team and I are disappointed with the current trends and are working diligently to change the trajectory of the Company and realize its inherent earnings power; however, as a result of softer than anticipated results in Q3 and our outlook for the balance of the fiscal year, we believe that it is prudent to take down our Q4 and full-year guidance for ID sales and earnings. IDs are now expected to be negative 6% for the year, and full-year earnings guidance has been reduced to a range of $1.25 to $1.35 per share, excluding one-time items. Sherry will provide more details on this shortly.Our results continue to reflect a still difficult economic environment and the fact that it will take more time than originally expected to turn around our negative operating trends. November marked the kickoff of our coordinated program to improve SuperValu’s price position and enhance value for our retail customers. This transformation program will roll out in phases and touch every aspect of our business from procurement to merchandising, and customer engagement to administrative costs. On our second quarter earnings call, I introduced the concept of business transformation to help describe the many changes that have begun at SuperValu as we work to implement our long-term operating plan. A dedicated team is now in place to work across the business line to track key work streams that we’ve identified. This work is being done with the help from a retail consulting firm that we formally engaged in the third quarter. They bring us a deep offering of proven tools that can be implemented at SuperValu with only modest modifications. We are beginning to track progress on these work streams with structure scorecards which measure results based on timelines, efficiency and financial impact. This methodical approach to monitoring and achieving business transformation has a history of success at other companies and will ensure that we remain on course.
To better manage our margins, we recently began implementing advanced promotional analytics and planning tools from this same retail consultant that give us much better insight into the full impact of our weekly ads on both sales and margins. These new tools and disciplined processes went live in mid-December and should help us get a better return on promotional investments.We have also instituted a more holistic process for planning weekly ads to ensure a good balance between driving trips and managing margins. Finally, the new analytics give us a much better handle on our temporary price reduction program to better determine the proper price point and timeline for these programs, as well as the appropriate vendor funding to support these promotions. We believe that using these tools will help us to make better promotional decisions and will allow us to manage our retail gross profit margins with more precision in F12. For the Company’s business transformation to be effective, it is imperative that we get the lowest cost of goods going forward based on our Company-wide buying power. We must act as one company with our vendors and leverage our merchandising initiatives. As I assessed our progress to expeditiously achieve this goal, it became increasingly clear that SuperValu must consolidate the leadership of its two merchandising organizations. Accordingly, last week we announced that our merchandising groups for both retail and supply chain segments will now report to Janel Haugarth, who will assume the title of EVP of Merchandising and Logistics. Janel will have sole responsibility for the merchandising activities across our traditional retail and independent businesses, though this does not include our hard discount format, Save-A-Lot. Read the rest of this transcript for free on seekingalpha.com