Slimmed-down grocer Supervalu beats estimates


By Chris Peters

Oct 17 (Reuters) - Supervalu Inc's quarterly profitbeat Wall Street estimates as the supermarket operator cut costsafter selling a number of its underperforming chains earlierthis year.

Supervalu shares, which have tripled since the companyannounced the sale of 900 stores including the Albertsons chainin January, slipped 3 percent on Thursday.

The company's second-quarter sales rose 0.2 percent to $3.95billion, propped up by fees earned under transition agreementswith Albertsons LLC and New Albertsons Inc.

Sales at all its business units fell during the quarter, butSupervalu said the rate of decline at its discount stores andregional chains slowed.

The company, which like larger rival Safeway is retreatingfrom some highly competitive regional markets, has been losingcustomers to Kroger Co and Wal-Mart Stores Inc.

Chief Executive Sam Duncan said he expects full-yearadjusted EBITDA to be modestly lower than the company's priorprojections, hurt by investments in its retail food business,which comprises the regional chains.

The retail food business reported a 1 percent fall in salesto $1.07 billion. Sales in the grocery distribution businessfell 1.6 percent, while those at Save-A-Lot discount stores fell0.1 percent.

Net income in the second quarter was $40 million, or 15cents per share, in the quarter ended Sept. 7. It lost $111million, or 52 cents per share, in the same quarter last year.

Excluding items, the company earned 13 cents per share, topping analysts' expectations by 2 cents. Gross margins rose to14.6 percent from 13.4 percent a year earlier.

Selling and administrative expenses fell 14 percent to $465million in the second quarter, largely due to operating a muchsmaller company.

Its interest bill fell by a third, thanks to lower interestrates and paying off debt after the $3.3 billion asset saleearlier in the year.

Minnesota-based Supervalu's shares were down 2.4 percent at $8.19 in mid-day trading on the New York Stock Exchange onThursday. About 13 percent of the company's outstanding stock isin short positions, according to Thomson Reuters data.

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