(Reuters) - Grocer Supervalu Inc (SVU.N) reported a setback in its turnaround efforts, lowering a key sales forecast after a disappointing quarter, and its already battered shares plunged almost 12 percent.
Expectations were very low ahead of the quarterly report from the third-largest U.S. supermarket operator, which owns the Jewel-Osco, Albertsons and Save-A-Lot chains. Supervalu took the bar down again on Wednesday, guiding to a larger decline in full-year sales than previously foreseen.
The company now expects identical-store sales, excluding fuel, to fall between 2.5 percent and 3 percent for fiscal 2012, which ends in March. It previously forecast a fall of 2 percent to 2.5 percent.
A key performance measure, Supervalu's identical-store sales show results from supermarkets operating for four full quarters, including store expansions and excluding fuel sales.
The Minneapolis-based company, which has been losing market share to Wal-Mart Stores Inc (WMT.N), Kroger Co (KR.N) and others and grappling with a large debt load, said identical-store sales fell 2.9 percent in the latest quarter, dragged down by a 4.6 percent drop in customer traffic.
The major U.S. supermarket chains are struggling with falling sales volumes as all but the top-earning shoppers remain very cautious about spending.
Supervalu's identical-store sales result was worse than expected and suggested its volume decline accelerated to between 7 percent and 8 percent, from around 6 percent in the prior two quarters, said Bob Summers of Susquehanna Financial Group.
"I think EPS expectations have to come down and that FY13 will be below the (forecast per-share profit of) $1.20 to $1.30 for FY12," Summer said. "My estimate is $1.05."
Janney Capital Markets analyst Jonathan Feeney said the sales miss was disappointing after the second quarter's improvement.
"It's just another in a string of misses," Feeney said in a client note.
Supervalu's stock, which traded above $35 four years ago, dropped 99 cents to $7.40 in afternoon trading on the New York Stock Exchange.
Supervalu is working to get its everyday pricing as low as bigger players, including Kroger, Safeway Inc SWY.N and Wal-Mart, amid fierce competition and rising food costs.
At the same time, it has been paying off debt from its $12.4 billion acquisition of more than 1,100 Albertsons stores in 2006. This has hampered its ability to compete more aggressively and stand out from rivals.
Kroger, the biggest and best-performing U.S. supermarket chain, has been funneling profits back into its business. In December, it reported a 5 percent increase in third-quarter sales at established stores, excluding fuel.
Analysts on a conference call pressed Supervalu Chief Executive Craig Herkert about the latest identical-store sales performance, which deteriorated from the second quarter.
Herkert, a former Walmart executive who was hired in May 2009 to turn Supervalu around, said turnaround efforts remain on track. He said the disappointing sales were compared with results from a year earlier, when the company was running specials that attracted markedly more shoppers but hurt profits.
"We are cycling some pretty irrational behavior on our side a year ago," he said, adding that sales trends should improve once the company laps those unsuccessful promotions.
Supervalu reported a net loss of $750 million, or $3.54 per share, for the fiscal third quarter ended December 3. That compared with a year-earlier loss of $202 million, or 95 cents per share.
Excluding one-time items, such as $800 million in goodwill and intangible asset impairment charges related to sustained weakness in its share price, Supervalu earned 24 cents per share, in line with analyst forecasts, according to Thomson Reuters I/B/E/S.
Net sales fell 4 percent to $8.33 billion, below analysts' average forecast of $8.42 billion.
Supervalu stuck with its October forecast for earnings of $1.20 to $1.30 per share, excluding one-time items, for the current fiscal year. That compares with Wall Street projections of $1.25.
(Additional reporting by Phil Wahba in New York; Editing by Gerald E. McCormick, Maureen Bavdek and John Wallace)