Supervalu Inc. reported a marginal drop in adjusted profit over the winter months, surprising investors and leading to a 6 percent jump in its stock Tuesday.
The results for the December-through-February period, the fourth quarter of Supervalu’s fiscal year, showed the Eden Prairie-based company continued to experience difficulty in its retail division, which includes Cub Foods, the biggest grocery store in the Twin Cities.
In addition to lower sales in its grocery stores, Supervalu said it took a $41 million charge to reflect a reduction in the value of certain assets in its retail business. A spokesman declined to specify which of its retail chains was involved in the charge.
Supervalu’s results showed that its bigger business as a wholesaler to grocers gained sales and profit momentum.
Overall, Supervalu said it earned $6 million, or 2 cents a share, down from $30 million, or 10 cents a share, a year ago. Excluding the retail asset charge, Supervalu earned $38 million, down from $39 million last year. That adjusted amount exceeded analysts’ expectations.
Sales rose about 1 percent to $2.9 billion. Its wholesale business saw a sales jump of 3 percent due to new customers and new stores operated by existing customers. In its retail unit, same-store sales were down 5.8 percent.
During the period, Supervalu closed on the sale of its Save-A-Lot discount grocery chain, which operated in Missouri and other central states. Certain costs associated with the sale of Save-A-Lot are included in the results.
Earlier this month Supervalu announced it will buy Unified Grocers, a Los Angeles-based food distributor for $375 million. The deal is expected to close in mid-to-late summer. Supervalu and Unified together will operate 24 distribution centers serving 3,000 grocery stores in 46 states.
Cub Foods and Hornbacher’s in the Fargo-Moorhead area will receive allocations of more capital investment this year. “We expect those market leaning banners will be defended,” said Bruce Besanko, chief operating officer and chief financial officer, referring to increased competition. “We want to continue to open new stores in those markets.”
Analyst Ajay Jain of Pivotal Research Group in New York called Supervalu’s latest results a “relief,” but reiterated his concern about its retail division.
“Management may soon need to demonstrate a viable exit strategy for retailing operations,” he said. He also expressed concern about a major wholesale account, Indianapolis-based Marsh, that is reportedly experiencing financial pressures and closing stores. Chief Executive Mark Gross responded to the concern by saying, “Marsh is paying our bills on time.”