Supervalu cuts full-year forecasts, stock slumps

By Brad Dorfman

CHICAGO (Reuters) - Grocery chain Supervalu Inc (SVU.N) cut its fiscal year sales and earnings forecasts on Tuesday, saying consumer spending will continue to be pressured by inflation, and its stock fell more than 7 percent.

The revised forecast for fiscal 2008 comes even as the company posted a 25 percent increase in profit for the third quarter ended in December, helped by declines in employee-related costs, depreciation expense, litigation charges and one-time acquisition costs. Supervalu acquired most of Albertson's Inc's grocery stores on June 2, 2006.

Supervalu said it now expects earnings of $2.71 to $2.77 a share in fiscal 2008, down from its previous forecast of $2.73 to $2.83 a share.

Sales at stores open at least a year are expected to be up 0.5 percent to 1.0 percent, excluding fuel, Supervalu said. The company previously had forecast a rise at the low end of a range of 1 percent to 2 percent.

Consumer spending has been pressured in recent months by soaring fuel and food costs, among other factors.

"When consumers see higher prices at the supermarket, (they) may start making choices," said Mitchell Corwin, analyst at Morningstar. He said choices could include trading down to lower-priced store brands or buying fewer items.

Supervalu said profit for the third quarter, ended December 1, was $141 million, or 66 cents a share, up from $113 million, or 54 cents, a year earlier. Analysts on average had forecast 63 cents a share, according to Reuters Estimates.

Sales fell 4.2 percent to $10.21 billion in the quarter, which had one less week of Albertson's sales than the year-earlier period. The lack of that week cut about $500 million from sales, the company said.

Supervalu also said it plans $1.3 billion in capital spending for fiscal 2009, the same as this year. Plans include 165 major store remodels, about 15 new traditional-size supermarkets, and 55 to 65 limited-assortment stores.

Supervalu shares were down $2.44 to $31.85 in morning trade on the New York Stock Exchange. The stock is down more than 7 percent since the beginning of 2007, compared with an 11 percent increase for larger rival Kroger Co (KR.N) and a 3.8 percent decline for Safeway Inc (SWY.N).

(Editing by John Wallace)