LOS ANGELES Grocery store operator Supervalu Inc (SVU.N) suspended its dividend and took other measures to fund aggressive price cuts to try to win back customers, while also launching a reviewing strategic alternatives.
The company, which has seen customers flee in recent years for lower prices at Wal-Mart Stores Inc (WMT.N), also on Wednesday said that profit fell 45 percent in the quarter ended June 16.
Supervalu shares fell 24.3 percent to $4 in extended trading Wednesday afternoon.
The third-largest U.S. grocery chain operator has been laying off workers, closing stores and selling assets as it tries to lower debt taken on in the $12.4 billion acquisition of more than 1,100 Albertsons stores in 2006.
Supervalu, which has been losing market share, has vowed to get its everyday pricing as low as bigger players Kroger Co (KR.N) and Safeway Inc SWY.N amid fierce competition and rising food costs.
But on Wednesday, Chief Executive Craig Heckert said the company needed to move more aggressively to cut prices as profit was half what analysts expected.
Supervalu said profit in the quarter was $41 million, or 19 cents a share, down from $74 million, or 35 cents a year ago. Analysts on average forecast 38 cents a share, according to Thomson Reuters I/B/E/S.
Sales for the quarter fell 4.7 percent to $10.59 million, while identical sales, an important performance measure that shows results from supermarkets operating for four quarters, fell 3.7 percent. Analysts on average forecast sales of $10.81 billion.
Aside from cutting the dividend, Supervalu plans to cut capital spending in the current fiscal year to a range of $450 million to $500 million from its previous plan of $675 million.
It will also increase debt reduction and replace its senior credit facility with loans backed by the company's real estate, a move it says will give it more financial flexibility by removing concerns about meeting certain benchmarks.
Supervalu said investment banks Goldman Sachs and Greenhill & Co will start a review of strategic alternatives.
But some questioned whether there would be a buyer for the company.
"Nobody views it as a viable buyout candidate anymore," said Summers, echoing the sentiment relayed to Reuters by investment bankers. "Why pay for them when you're going to get the market share for free?"
(Additional reporting by Reporting by Brad Dorfman in Chicago.; Editing by Gary Hill, Bernard Orr)