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Supervalu profit down 14%; forecast cut
The Eden Prairie grocery company said it's being squeezed by higher costs.
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Grocer Supervalu Inc. said Tuesday its profit fell nearly 14 percent in its second quarter as the chain attempted to keep prices low and answer consumers' demands for value.
The Eden Prairie company also chopped its 2009 profit guidance by 4 cents per share.
For the quarter ended Sept. 6, Supervalu said its profit dipped to $128 million, or 60 cents per share, from $148 million, or 69 cents per share. Excluding one-time costs, the company earned 61 cents per share, well below the average estimate of 69 cents per share forecast by analysts surveyed by Thomson Reuters.
Supervalu said it took a hit to profit by not passing on higher prices charged by food makers to cover ingredient costs. Food makers, pressured by higher costs for corn and other commodities, have raised the price of their goods. Supermarkets must then decide whether to eat those costs themselves to keep prices down for consumers or to raise the price of the product on grocery store shelves.
Some grocers have decided to boost their own prices to avoid the profit hit, resulting in strong earnings and revenue.
But Supervalu spokeswoman Jean Giese said the ailing economy and consumers' desire for value led the company to try to keep prices lower and to offer more promotions in some markets. That promotional spending also cut into profits.
Sales rose less than 1 percent to $10.23 billion from $10.16 billion, but still topped analysts' $10.12 billion forecast.
Retail food sales were flat but the company reported a 1.3 percent drop in identical store sales, or sales at stores open at least a year that have not been remodeled.
For fiscal 2009, Supervalu cut its profit outlook to between $2.86 and $2.96, and to $2.90 to $3 per share excluding costs. Analysts currently see operating profit of $2.95 per share.
Previously, the company had said it expected profit of $3 to $3.16 per share, or $3.04 to $3.20 per share excluding one-time costs.
Chief Executive Jeff Noddle said the company plans to cut its costs in the second half of the year. He added that Supervalu has also "taken action to improve our sales performance while creating value for our customers."
In premarket trading, shares slipped 7 cents to $18.33, having closed Monday at $18.40. The stock has lost more than half its value since trading at $43.30 last November.
The Eden Prairie company also chopped its 2009 profit guidance by 4 cents per share.
For the quarter ended Sept. 6, Supervalu said its profit dipped to $128 million, or 60 cents per share, from $148 million, or 69 cents per share. Excluding one-time costs, the company earned 61 cents per share, well below the average estimate of 69 cents per share forecast by analysts surveyed by Thomson Reuters.
Supervalu said it took a hit to profit by not passing on higher prices charged by food makers to cover ingredient costs. Food makers, pressured by higher costs for corn and other commodities, have raised the price of their goods. Supermarkets must then decide whether to eat those costs themselves to keep prices down for consumers or to raise the price of the product on grocery store shelves.
Some grocers have decided to boost their own prices to avoid the profit hit, resulting in strong earnings and revenue.
But Supervalu spokeswoman Jean Giese said the ailing economy and consumers' desire for value led the company to try to keep prices lower and to offer more promotions in some markets. That promotional spending also cut into profits.
Sales rose less than 1 percent to $10.23 billion from $10.16 billion, but still topped analysts' $10.12 billion forecast.
Retail food sales were flat but the company reported a 1.3 percent drop in identical store sales, or sales at stores open at least a year that have not been remodeled.
For fiscal 2009, Supervalu cut its profit outlook to between $2.86 and $2.96, and to $2.90 to $3 per share excluding costs. Analysts currently see operating profit of $2.95 per share.
Previously, the company had said it expected profit of $3 to $3.16 per share, or $3.04 to $3.20 per share excluding one-time costs.
Chief Executive Jeff Noddle said the company plans to cut its costs in the second half of the year. He added that Supervalu has also "taken action to improve our sales performance while creating value for our customers."
In premarket trading, shares slipped 7 cents to $18.33, having closed Monday at $18.40. The stock has lost more than half its value since trading at $43.30 last November.
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