Supervalu acknowledged Thursday that it is talking with potential buyers, and the supermarket giant's latest grim financial results show exactly why a sell-off may be necessary.

A sales free fall continued during its latest quarter, the company reported Thursday, while profits as viewed by Wall Street analysts were zero -- much worse than they expected.

Supervalu said in July that it would consider selling all or parts of the company, after years of steadily declining sales and market share had cratered its stock. Thursday, the Eden Prairie-based company said it "has received a number of indications of interest and is in active dialogue with several parties."

The company declined to comment further, but even with that tidbit of buyout news its stock jumped almost 5 percent, closing at $2.14.

"People are kicking the tires," said Michael Keara, a stock analyst at Morningstar Inc. "I think it's a normal course of action."

Still, Keara said Supervalu is unlikely to be sold as a whole, but rather pieces of it might be parceled out.

That echoes other analysts' sentiment. There's been speculation that private equity groups or rival supermarkets might pick off some of Supervalu's 11 chains, which span the country and include Cub Foods, the Twin Cities largest grocery outfit.

But Supervalu's continuing poor financial results could hurt any sales efforts. "Weak trends may reduce the level of interest in these businesses and in [how much] investors are willing to pay," according to a report Thursday from Fitch Ratings.

Wayne Sales, who took the helm at Supervalu in July after previous CEO Craig Herkert was terminated, told analysts Thursday that the firm's performance is "not acceptable."

Sales said "we will continue to move with urgency to grow sales and improve our performance while focusing time and attention to taking costs out of our business."

It's a major uphill battle: Supervalu has been battered by a weak economy and drubbed by lower-priced competitors.

Supervalu posted a loss for the second quarter of its fiscal year of $111 million, the effect of several one-time charges. Excluding charges, the preferred view on Wall Street, Supervalu recorded profits of zero, compared with a profit of $60 million a year ago. Supervalu's sales clocked in at $8 billion, down from $8.4 billion a year ago.

Struggles at Save-A-Lot

Even Save-A-Lot -- the national discount chain that analysts see as one of Supervalu's most valuable and saleable assets -- fared poorly, its same-store sales declining 3.7 percent over a year ago.

Excluding one-time charges, Save-A-Lot's quarterly operating profits were $34 million, down from $50 million a year ago. The decline stemmed mostly from price cuts needed to make Save-A-Lot more competitive, as well as increased administrative costs to support growth, Supervalu said.

Save-A-Lot, which has little presence in Minnesota, operates on an ultra-low price, "hard discount" format that's akin to Aldi grocery outlets.

The chain's quarterly performance was "particularly disappointing," according to Fitch, "given that hard discount operators typically thrive in a cautious consumer environment as their prices are more competitive than discount retailers such as Wal-Mart."

For several quarters, Supervalu has been working to reduce the price gap between its conventional grocery stores and the competition. Indeed, the company under Herkert in July said it would accelerate price cuts, which are seen as crucial to improving Supervalu's competitive edge.

However, Sales said Thursday the price-cut pace will be slowed. Supervalu will not complete price reduction programs in half of its stores by the end of its fiscal year ending in February, as previously announced.

"One of the fundamentals of retailing is being competitively priced," Sales told investors. "But you have to think more holistically beyond [being] competitively priced and that's what we are doing."

One reason: When prices are cut without a corresponding rise in business, profits can deteriorate. And Supervalu has enough of that problem already.

Mike Hughlett • 612-673-7003