Supervalu outlook unnerves Wall Street

Supervalu Inc. on Tuesday rattled investors with a relatively weak annual profit outlook coupled with a continued sharp decline in sales -- a downturn that has no quick end in sight.

Wall Street reacted by sending shares down 5 percent. The stock closed at $16.27, down 87 cents on a day the major indexes posted gains.

Supervalu, like most big traditional grocery chains, has been slammed by recession, falling food prices and intense competition from discount supermarkets like Wal-Mart. Tuesday, while it posted fourth-quarter profits that topped expectations, Supervalu didn't make a convincing argument to Wall Street that it's out of the storm.

"There's nothing to suggest things have turned," said Scott Mushkin, a stock analyst with Jefferies & Co. "The [grocery] industry is getting a little better, but they are seeing none of that."

Mushkin said Supervalu's 3 percent drop in customer traffic during its fourth quarter was worse than the declines of the previous two quarters. "That is just kind of unnerving," he said.

The company's same-store sales, a key financial gauge, fell 6.8 percent compared with the same quarter last year, considerably worse than the 6.1 percent drop that analysts, on average, had expected.

"The economy will continue to pressure consumer spending," Pam Knous, the company's chief financial officer, said in a conference call Tuesday with stock analysts.

Supervalu, which operates Cub Foods locally, expects that its same-store sales will improve during its current fiscal year, which began Feb. 28. Yet those sales are still expected to decline 2 percent for the entire year. Some analysts seemed incredulous that Supervalu would even reach that goal.

"It will be difficult to achieve," Jonathan Feeney, a Janney Capital Markets analyst, wrote in a report Tuesday.

Meanwhile, Supervalu's guidance for this fiscal year's earnings -- $1.65 cents per share to $1.85 cents per share -- fell short of the $1.96 expected by Wall Street.

For the quarter ended Feb. 27, Supervalu earned $97 million, or 46 cents per share. Excluding 16 cents per share in charges related to one-time items, profit was 62 cents per share -- 1 cent above analysts' estimates. A year ago, the grocer reported a loss of $201 million, or 95 cents per share, a figure that included $1.82 per share in one-time items.

Supervalu's total revenue for its fourth quarter fell 15 percent to $9.21 billion, a bit below Wall Street forecasts.

Company Chief Executive Craig Herkert was upbeat in a conference call with analysts. He noted the fourth quarter delivered on earnings, and said the company has reduced its debt by more than expected.

Also Tuesday, Supervalu announced that it was reducing its board of directors from 15 members to 12 members. Three directors are retiring, while two others are voluntarily resigning, the company said in a press release. Two new members are being nominated.

Wayne Sales, a Supervalu board member since 2006, will become the new non-executive chairman. The chairman's job was held by former CEO Jeff Noddle, who is leaving the board as planned after his 2009 retirement announcement.

Mike Hughlett • 612-673-7003