* Warns Q1 profit will be far below Street view
* Cites tighter spending by consumers
* Shares down 10.8 percent; Kroger, Safeway fall
(Adds analyst comment, background, byline; updates share
activity; previous dateline CHICAGO)
By Lisa Baertlein
LOS ANGELES, June 24 Supervalu Inc (SVU.N)
warned on Wednesday that quarterly profit will be
"substantially below" analysts' expectation after it cut prices
and boosted promotions to lure shoppers amid a deep recession.
The grocer's stock fell 10.8 percent and dragged down
shares in rivals Kroger Co (KR.N) and Safeway Inc SWY.N.
The operator of about 2,500 Albertsons, Jewel-Osco, Shaw's
and Save-A-Lot stores also cited an intensely competitive
environment, which led it to lower prices on thousands of
everyday items and to increase spending on advertising and
other efforts designed to bring in consumers
Analysts polled by Reuters Estimates were expecting a
profit of 65 cents a share for the first quarter ended on June
"Consumers have become more value-focused and cautious in
their spending, which has pressured sales and margins greater
than anticipated," Chief Executive Craig Herkert said in a
Herkert was named CEO in May, joining the Minneapolis-based
company from Wal-Mart Stores Inc (WMT.N), where he was CEO of
the Americas region. He said on Wednesday that he was engaged
in a full review of Supervalu's operations.
Faced with competition from lower-priced retailers like
Wal-Mart, grocers like Supervalu and Safeway have taken steps
to bring down prices as consumers grapple with the highest
level of unemployment in nearly three decades.
In some markets, Supervalu has cut prices up to 20 percent
on thousands of staple products. [ID:nN12326481].
Supervalu expects identical-store sales in the first
quarter to be down about 3 percent.
The company's identical-store sales include results from
outlets operating for four full quarters, including store
expansions and excluding fuel sales.
The profit warning "will place an overhang on the entire
sector as investors begin to speculate on how Supervalu will
reinvigorate sales and stem the decline," Pali Capital analyst
Robert Summers said. "Competition could dramatically escalate
over the near-term, particularly given the weak overall
Kroger, the No. 1 supermarket chain, on Tuesday posted a
higher-than-expected quarterly profit, but did not raise its
full-year forecast. Kroger is widely viewed as having lower
prices than Supervalu and Safeway, but it also is working to
Jefferies analyst Scott Mushkin said Safeway could again
trim expectations, but noted that the California-based
supermarket company's business is in better shape than
Supervalu has more debt than many of its rivals due to its
purchase of more than 1,100 Albertsons stores in 2006. In
January it unveiled plans to close dozens of stores, cut
expenses and pay down debt.
The grocer said it would update its annual outlook on July
28, when it plans to report first-quarter results. Analysts
expect a full-year profit of $2.50 a share.
Shares of Supervalu slid were down $1.70 at $13.99 in
morning trading. Shares in Safeway were down 2.5 percent, while
Kroger's were down 1.8 percent.
(Reporting by Ben Klayman and Lisa Baertlein, editing by Lisa
Von Ahn and Derek Caney)