SUPERVALU reports $4.11 billion net sales in Q3 fiscal 2016

  • Consolidated operating earnings of $101 million; Adjusted EBITDA of $182 million for Q3 fiscal 2016
  • Net earnings per share from continuing operations of $0.13; adjusted earnings per share of $0.16
  • Redeemed remaining $278 million of 8.00% Senior Notes due May 2016 on January 6, 2016

MINNEAPOLIS, 2016-01-13 — /EPR Retail News/ — SUPERVALU INC. (NYSE: SVU) today reported third quarter fiscal 2016 net sales of $4.11 billion and net earnings from continuing operations of $35 million, or $0.13 per diluted share, which included $11 million in after-tax charges and costs related to asset impairments, the potential separation of Save-A-Lot, and employee severance. When adjusted for these items, third quarter fiscal 2016 net earnings from continuing operations were $46 million, or$0.16 per diluted share.

Net earnings from continuing operations for last year’s third quarter were $12 million, or $0.04 per diluted share, which included a$36 million after-tax pension settlement charge and $1 million in after-tax debt refinancing and net information technology intrusion costs. When adjusted for these items, third quarter fiscal 2015 net earnings from continuing operations were $49 million, or $0.18 per diluted share. [See tables 1-5 for a reconciliation of GAAP and non-GAAP (adjusted) results appearing in this release.]

“Although third quarter adjusted EBITDA was in-line with our operating plan, we continue to operate in a challenging environment,” said President and CEO Sam Duncan. “Improving sales is a primary focus as we look to complete the fiscal year.”

Third Quarter Results – Continuing Operations

Third quarter net sales were $4.11 billion compared to $4.23 billion last year, a decrease of $111 million or 2.6 percent. Save-A-Lot network identical store sales were negative 3.4 percent. Identical store sales for corporate stores within the Save-A-Lot network were negative 0.4 percent. Retail Food identical store sales were negative 2.6 percent. Total net sales within the Independent Business segment decreased 3.5 percent. Fees earned under transition services agreements (“TSAs”) in the third quarter were $46 million compared to $43 million last year.

Gross profit for the third quarter was $601 million, or 14.6 percent of net sales. Last year’s third quarter gross profit was $596 million, or 14.1 percent of net sales. The increase in gross profit rate compared to last year was primarily driven by higher base margins across all three segments, lower logistics costs, and higher TSA fees, partially offset by higher employee and occupancy costs.

Selling and administrative expenses in the third quarter were $494 million and included charges and costs of $10 million for the potential separation of Save-A-Lot, store closure impairments and employee severance. When adjusted for these items, selling and administrative costs were $484 million, or 11.7 percent of net sales. Selling and administrative expenses in last year’s third quarter were $540 million and included a $63 million pension settlement charge and $1 million in information technology intrusion costs, net of insurance recoverable. When adjusted for these items, last year’s selling and administrative expenses were $476 million, or 11.3 percent of net sales.

Net interest expense for the third quarter was $45 million. Last year’s third quarter interest expense was $46 million and included$1 million in debt refinancing costs. When adjusted for this item, last year’s third quarter interest expense was $45 million.

Income tax expense was $22 million, or 37.6 percent of pre-tax earnings, for the third quarter, compared to an income tax benefit of $1 million, or 8.9 percent of pre-tax earnings in last year’s third quarter. The increase in the effective tax rate is primarily due to the pension settlement charge included in the prior year.

Independent Business

Third quarter Independent Business net sales were $1.90 billion, compared to $1.97 billion last year, a decrease of 3.5 percent. The decrease is primarily due to lower sales to existing customers and lost stores, partially offset by increased sales to new customers and new stores operated by existing customers.

Independent Business operating earnings in the third quarter were $54 million, or 2.8 percent of net sales, and included a $6 million intangible asset impairment charge. When adjusted for this item, Independent Business operating earnings were $60 million or 3.2 percent of net sales. Last year’s Independent Business operating earnings in the third quarter were $60 million, or 3.1 percent of net sales.

Save-A-Lot

Third quarter Save-A-Lot net sales were $1.07 billion, compared to $1.09 billion last year, a decrease of 1.5 percent. The sales decrease reflects identical store sales across the Save-A-Lot network of negative 3.4 percent and the impact of closed stores.

Save-A-Lot operating earnings in the third quarter were $32 million, or 2.9 percent of net sales, and included $2 million of store closure impairment charges. When adjusted for this item, Save-A-Lot’s operating earnings were $34 million, or 3.1 percent of sales. Last year’s Save-A-Lot operating earnings in the third quarter were $34 million, or 3.1 percent of net sales.

Retail Food

Third quarter Retail Food net sales were $1.10 billion, compared to $1.13 billion last year, a decrease of 2.5 percent. The sales decrease reflects negative identical store sales of 2.6 percent.

Retail Food operating earnings in the third quarter were $21 million, or 2.0 percent of net sales, and included $1 million of store closure impairment charges. When adjusted for this item, Retail Food operating earnings were $22 million, or 2.1 percent of sales. Last year’s Retail Food operating earnings were $28 million, or 2.5 percent of net sales. The decrease in Retail Food operating earnings was driven by higher employee-related costs.

Corporate

Third quarter fees earned under the TSAs were $46 million compared to $43 million last year.

Net Corporate operating loss in the third quarter was $6 million and included $7 million of costs related to the potential separation of Save-A-Lot and employee severance. When adjusted for these items, net Corporate operating earnings were $1 million. Last year’s third quarter net Corporate operating loss was $66 million and included $64 million in charges and costs for a pension settlement charge and information technology intrusion costs, net of insurance receivable. When adjusted for these items, last year’s net Corporate operating loss was $2 million. The improvement in net Corporate operating earnings was primarily driven by lower employee-related costs and higher fees earned under the TSAs.

Cash Flows – Continuing Operations

Year-to-date fiscal 2016 net cash flows provided by operating activities of continuing operations were $251 million compared to$104 million last year, reflecting lower levels of investment in working capital and lower benefit plan contributions. Year-to-date net cash flows used in investing activities of continuing operations were $198 million compared to $209 million last year. Year-to-date net cash flows used in financing activities of continuing operations were $34 million compared to net cash flows provided by financing activities of $438 million last year, which included proceeds from a bond issuance.

Conference Call ­­­
A conference call to review the third quarter results is scheduled for 9:00 a.m. central time today. The call will be webcast live at www.supervaluinvestors.com (click on microphone icon). A replay of the call will be archived at www.supervaluinvestors.com. To access the website replay go to the “Investors” link and click on “Presentations and Webcasts.”

About SUPERVALU INC.
SUPERVALU INC. is one of the largest grocery wholesalers and retailers in the U.S. with annual sales of approximately $18 billion.SUPERVALU serves customers across the United States through a network of 3,407 stores composed of 1,871 independent stores serviced primarily by the Company’s food distribution business; 1,336 Save-A-Lot stores, of which 883 are operated by licensee owners; and 200 traditional retail grocery stores (store counts as of December 5, 2015). Headquartered in Minnesota,SUPERVALU has approximately 40,000 employees. For more information about SUPERVALU visit www.supervalu.com.

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

Except for the historical and factual information contained herein, the matters set forth in this news release, particularly those pertaining to SUPERVALU’s expectations, guidance, or future operating results, and other statements identified by words such as “estimates,” “expects,” “projects,” “plans,” “intends,” and similar expressions are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including competition, ability to execute initiatives, substantial indebtedness, labor relations issues, escalating costs of providing employee benefits, relationships with Albertson’s LLC, New Albertson’s Inc., and Haggen, intrusions to and disruption of information technology systems, impact of economic conditions, governmental regulation, food and drug safety issues, legal proceedings, severe weather, natural disasters and adverse climate changes, disruption to supply chain and distribution network, changes in military business, adequacy of insurance, volatility in fuel and energy costs, asset impairment charges, fluctuations in our common stock price and other risk factors relating to our business or industry as detailed from time to time in SUPERVALU’s reports filed with the SEC. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. Unless legally required,SUPERVALU undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Source: SUPERVALU INC.

SUPERVALU INC.
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