SUPERVALU Reports Second Quarter Fiscal 2010 Earnings
SUPERVALU Reports Second Quarter Fiscal 2010 Earnings •Earnings Per Share Exceed First Call Consensus •Company Narrows Earnings Per Share Guidance For Year •Management Affirms $700 million Fiscal 2010 Debt Reduction Outlook •Board Adopts New Dividend Policy Effective March 2010, Reduced Payout Provides Capital for Save-A-Lot Growth
MINNEAPOLIS--(BUSINESS WIRE)--Oct. 20, 2009-- SUPERVALU INC. (NYSE:SVU) today reported second quarter fiscal 2010 net sales of $9.5 billion and net earnings of $74 million, or $0.35 per diluted share. In the second quarter of fiscal 2009, the company reported net sales of $10.2 billion and net earnings of $128 million, or $0.60 per diluted share, including after-tax one-time acquisition related costs of $2 million or $0.01 per diluted share.
Craig Herkert, SUPERVALU’s chief executive officer and president, said, “Consumer purchasing behavior, deflationary pressures, as well as our decision to make meaningful investments in price and promotions significantly impacted our second quarter sales and margins. As a result, earnings were lower than the prior year, generally in line with our expectations, and slightly better than analysts’ consensus of $0.33 per share as reported by First Call. Even as we have made these investments which resulted in pressure on our margins, I’m pleased that our total debt has been reduced $340 million since year end. As we move into the last half of the year, we will place intense focus on in-store execution and merchandising programs. I am confident that our strategy to provide shoppers with enhanced value and other changes we are now making, will allow us to compete more effectively.”
“As my vision of SUPERVALU as “America’s Neighborhood Grocer” unfolds, I am excited by the long-term prospects for this company. Our 4,300 store network is uniquely positioned to serve the diverse needs of neighborhoods across America and provides an outstanding platform from which we can grow,” Herkert added.
Second Quarter Results
Second quarter retail food net sales were $7.4 billion compared to $8.0 billion last year, a decrease of 6.9 percent, primarily reflecting the impact of identical store sales of negative 4.8 percent and previously announced store closures. The identical store sales performance primarily results from a challenging economic environment, heightened competitive activity, deflationary pressures and investments in price and promotions. Customer traffic declines represented only a nominal component of the decrease. Retail square footage decreased 3.1 percent from the second quarter of fiscal 2009. Excluding the impact of store closures, total retail square footage increased 0.9 percent compared to the second quarter of fiscal 2009.
Second quarter supply chain services net sales were $2.0 billion compared to $2.3 billion last year, a decrease of 9.5 percent, primarily reflecting the on-going transition of Target Corporation volume to self-distribution.
Net interest expense for the second quarter was $131 million compared to $141 million last year reflecting lower interest rates and reduced borrowing levels. The company remains in compliance with all debt covenants.
SUPERVALU’s income tax expense was $40 million, or 35.1 percent of pre-tax income in the second quarter compared to $73 million, or 36.4 percent of pre-tax income in last year’s second quarter, primarily reflecting a lower effective state tax rate.
Capital spending for the second quarter was $158 million compared to $281 million in the prior year, including approximately $11 million in capital leases. In the second quarter the company completed 27 major remodels, 4 minor remodels and 1 new traditional supermarket. Year to date capital spending was $396 million compared to $677 million in the prior year, including approximately $12 million in capital leases.
Total debt to capital was 75 percent at quarter-end compared to 77 percent at fiscal 2009 year-end. This ratio is calculated as total debt, including current and long-term debt and obligations under capital leases, divided by the sum of total debt and total stockholders’ equity.
Diluted weighted-average shares outstanding for the second quarter were 213 million shares compared to 213 million shares last year. As of September 12, 2009, SUPERVALU had 212 million shares outstanding.
Year-to-date net cash flows from operating activities were $840 million compared to $745 million in the prior year, primarily reflecting an improvement in working capital. Year-to-date net cash flows used in investing activities were $369 million compared to $585 million last year, primarily reflecting reduced capital expenditures in the current year. Year-to-date net cash used for financing activities were $442 million compared to $130 million last year, primarily reflecting higher levels of debt reduction in the current year.
Fiscal 2010 Guidance
Commenting on guidance, Herkert stated, “We are taking ten cents off the top of our previous fiscal 2010 earnings guidance range as the economic outlook in the back half of the year and its impact on consumers has become clearer.” Identical store sales, excluding fuel, are now projected to be approximately negative 4 percent for the year compared to previous guidance of negative 3 percent. As a result, fiscal 2010 net earnings are expected to be in the range of $1.95 to $2.05 per diluted share on a GAAP basis and $2.01 to $2.11 on an adjusted basis when excluding costs related to store closures.