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Slimmed-down grocer Supervalu beats estimates

By Chris Peters

Oct 17 (Reuters) - Supervalu Inc's quarterly profit beat Wall Street estimates as the supermarket operator cut costs after selling a number of its underperforming chains earlier this year.

Supervalu shares, which have tripled since the company announced the sale of 900 stores including the Albertsons chain in January, slipped 3 percent on Thursday.

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

Sales at all its business units fell during the quarter, but Supervalu said the rate of decline at its discount stores and regional chains slowed.

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

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

The retail food business reported a 1 percent fall in sales to $1.07 billion. Sales in the grocery distribution business fell 1.6 percent, while those at Save-A-Lot discount stores fell 0.1 percent.

Net income in the second quarter was $40 million, or 15 cents per share, in the quarter ended Sept. 7. It lost $111 million, 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 to 14.6 percent from 13.4 percent a year earlier.

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

Its interest bill fell by a third, thanks to lower interest rates and paying off debt after the $3.3 billion asset sale earlier 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 on Thursday. About 13 percent of the company's outstanding stock is in short positions, according to Thomson Reuters data.