UPDATE 3-Supervalu profit beats Street; shares rise
* Q3 EPS ex-items 46 cents vs Street view 40 cents
* Sales down 10 pct at $9.2 bln, miss estimates
* Backs FY profit view, sees further pressure on sales
* Shares rise 5.6 percent (Adds A&P's results; comments from conference call, analysts)
NEW YORK, Jan 12 (Reuters) - Supervalu Inc (SVU.N) reported a higher-than-expected quarterly profit on tighter cost controls and fewer promotions, and stood by its full-year forecast in the face of weak sales trends. It shares rose more than 5 percent.
Fierce competition has prompted many grocers to slash prices, but Supervalu -- which operates about 2,500 stores under Albertsons, Jewel-Osco, Shaw's and other names -- has not been aggressively promotional. That has led some analysts to express concerns that its pricing strategy will cost it market share.
"The third-quarter's performance is a clear sign that the company is more likely to be rational when it comes to price investments and attempt to protect near-term earnings," Goldman Sachs analyst John Heinbockel said in a note.
Jefferies analyst Scott Mushkin said a pricing survey he did in Philadelphia and Boston showed Supervalu's prices "creeping up."
"This is, in turn, leading to accelerating market share losses, but better (operating) earnings in the short-run," Mushkin said.
"They have got to walk that fine line between promoting just enough to get the customers in the store versus lowering prices too much," Doug Conn, a credit analyst with Hexagon Securities said.
For its part, Supervalu forecast a drop in same-store sales of about 5 percent for this fiscal year, worse than its prior outlook of a 4 percent decline.
The company, which has been remodeling stores and expanding its lower-priced Save-A-Lot format, has lagged behind rivals ranging from Wal-Mart Stores Inc (WMT.N) to Kroger Co (KR.N) and Safeway Inc (SWY.N), since the start of the U.S. recession.
On Tuesday, smaller grocer Great Atlantic & Pacific Tea Co Inc (GAP.N), or better known as A&P, posted a bigger third-quarter loss, hurt by lower margins and one-time charges, and said it expects a new chief executive in office by the start of the new fiscal year.[ID:nSGE60A0GJ]
In Supervalu's fiscal third quarter, ended Dec. 5, net profit was $109 million, or 51 cents a share, compared with a year-earlier loss of $2.9 billion, or $13.95 a share, that included charges of $3.1 billion.
Excluding a net gain from exiting the Salt Lake City retail market and costs from previously announced store closures, the profit was 46 cents a share, beating analysts' average forecast of 40 cents, according to Thomson Reuters I/B/E/S.
Net sales fell about 10 percent to $9.2 billion, missing the analysts' average estimate of $9.43 billion.
For the full year, Supervalu still expects to earn $2.01 to $2.11 a share, excluding items. Analysts had forecast profit of $1.86 per share.
Supervalu shares were up 5.6 percent at $13.64 on the New York Stock Exchange. (Editing by Michele Gershberg, Gerald E. McCormick, Lisa Von Ahn and Steve Orlofsky)
