* Q1 profit excluding items $0.55; Wall St view $0.53
* Lowers fiscal 2010 EPS, sales forecasts
* Sells 36 Utah stores
* Shares up 4.2 percent
(Adds executive, analyst comments, byline, updates stock
activity; adds LOS ANGELES TO dateline)
By Jessica Wohl and Lisa Baertlein
CHICAGO/LOS ANGELES, July 28 Supermarket chain
Supervalu Inc (SVU.N) posted lower quarterly profit on Tuesday,
hurt by stepped-up competition and the recession, but its
shares rose 4.2 percent after it said it would sell 36 stores
The operator of about 2,500 Albertsons, Jewel-Osco, Shaw's
and Save-A-Lot supermarkets said it will sell most of its
Albertsons stores in Utah to Associated Food Stores and wants
to sell four other stores in the state. [ID:nWNBB3883]
The move marks the first big asset sale under Chief
Executive Craig Herkert, who came to Supervalu from grocery
leader Wal-Mart Stores Inc (WMT.N) in May. Herkert declined to
say whether other asset sales were in the works.
"Part of the bullish story that people have here is that
they're going to engage in asset divestitures," said Pali
Capital analyst Robert Summers.
Profit fell to $113 million, or 53 cents per share, in the
fiscal first quarter ended June 20, from $162 million, or 76
cents per share, a year earlier.
"Consumers have become even more value-focused and cautious
in their spending ... It takes a bargain today to achieve a
sale," Herkert said on his first quarterly call with analysts.
Low-margin discounted items made up a bigger-than-expected
percentage of store sales, which fell in the quarter. Herkert
said the chain needs to lower everyday prices rather than
depend on deep discounts.
Steep declines in food prices combined with less frequent
purchases of more profitable items like flowers, precut fruit
and drinks from in-store coffee bars contributed to the 30
percent drop in quarterly profit.
Supervalu, expecting pressure to continue on consumers in
the near term, cut its sales and profit expectations for the
fiscal year. The current second quarter should be the weakest
one of the year, said Chief Financial Officer Pam Knous.
Its weaker outlook came five days after rival Safeway Inc
SWY.N slashed its profit view [ID:nN23383604].
Supervalu's revised forecast was not a surprise, and some
investors were looking for a bigger cut, said Summers, who
remained the sidelines with a "neutral" rating.
"It's too cheap to short, but the fundamentals don't
warrant getting involved," he said.
Supervalu and Safeway have been paring prices as they
battle retailers ranging from Wal-Mart to dollar stores, which
have attracted shoppers grappling with rising unemployment and
In markets like Southern California and Chicago, Supervalu
has cut prices by up to 20 percent on thousands of staples.
Excluding store closure and one-time acquisition-related
costs, earnings were 55 cents per share. Analysts expected 53
cents, according to Reuters Estimates.
"It's entirely impossible to spin the quarter as anything
but a significant disaster," said Summers.
While earnings topped analysts' recent expectations,
Supervalu had warned in late June that profit would be
"substantially below" expectations after it cut prices and
boosted promotions to lure shoppers. At that time, the average
view was 65 cents per share.
Net sales fell 4.7 percent to $12.72 billion, including
results from the company's supply chain business.
Identical-store sales were off 3.2 percent, in line with
the decline of about 3 percent the company predicted. Those
sales include results from outlets operating for four full
quarters, including store expansions and excluding fuel sales.
Supervalu cut its fiscal-year adjusted earnings forecast to
$2.01 to $2.21 a share from a prior target of $2.50 to $2.65.
Jefferies analyst Scott Mushkin said the new outlook
"should be viewed positively given expectations for a range as
low as $1.80-$2.00."
The company now expects identical-store sales to fall about
3 percent this year. It previously expected a range of down 1
percent to up 1 percent.
Supervalu shares were up 59 cents at $14.58 in mid-day
trading on the New York Stock Exchange after soaring to