- Fourth quarter net earnings from continuing operations of $6 million; adjusted EBITDA of $124 million
- Fourth quarter net earnings per share from continuing operations of $0.02; adjusted earnings per share of $0.13
- Completion of Save-A-Lot sale in fourth quarter strengthened balance sheet
- Agreement to acquire Unified Grocers announced in April 2017
- Total outstanding debt and pension obligation reduced by $1.04 billion and $248 million, respectively, in fiscal 2017
MINNEAPOLIS, 2017-Apr-29 — /EPR Retail News/ — SUPERVALU INC. (NYSE: SVU) today (Apr. 25, 2017) reported fourth quarter fiscal 2017 consolidated net sales of $2.91 billion and net earnings from continuing operations of $6 million, or $0.02 per diluted share, which included $32 million in after-tax charges and costs related to an asset impairment charge, unamortized financing cost charges and a pension settlement charge. When adjusted for these items, fourth quarter fiscal 2017 net earnings from continuing operations were $38 million, or $0.13 per diluted share.
Net earnings from continuing operations for last year’s fourth quarter were $30 million, or $0.10 per diluted share, which included $9 million in after-tax charges and costs related to debt refinancing charges and store closure charges and costs. When adjusted for these items, fourth quarter fiscal 2016 net earnings from continuing operations were $39 million, or $0.14 per diluted share.
In the fourth quarter of fiscal 2017, SUPERVALU completed the sale of its Save-A-Lot business. The results of operations, financial position and cash flows of the Save-A-Lot business are presented as discontinued operations for all periods, and SUPERVALU’s results from continuing operations no longer include the sales, operating earnings, net earnings, and adjusted EBITDA from Save-A-Lot. Certain costs previously charged to Save-A-Lot are included in SUPERVALU’s results from continuing operations and now relate to performing under the services agreement entered into with Save-A-Lot. For comparability purposes, management includes a pro forma adjustment to its adjusted EBITDA that reflects the fees SUPERVALU expects to recognize under the services agreement for the applicable periods prior to the sale. [See tables 1-6 for a reconciliation of GAAP and non-GAAP (adjusted) results appearing in this release.]
“We finished fiscal 2017 with momentum in our Wholesale business and an improved balance sheet resulting from the sale of Save-A-Lot,” said President and CEO Mark Gross. “I’m very excited about our agreement to acquire Unified Grocers as it brings together two great companies to create one of the nation’s leading grocery wholesale organizations. At the same time, we are working to fundamentally improve the shopping experience in our retail stores and with new leadership and renewed passion we are focused on changing our operating results. I remain optimistic for growth and believe strongly in the path our team is pursuing to achieve it.”
Fourth Quarter Results – Continuing Operations
Fourth quarter net sales were $2.91 billion compared to $2.89 billion last year, an increase of $16 million or 0.6 percent. Total net sales within the Wholesale segment increased 3.0 percent. Retail identical store sales were negative 5.8 percent. Fees earned under services agreements in the fourth quarter were $42 million compared to $44 million last year.
Gross profit for the fourth quarter was $435 million, or 15.0 percent of net sales. Last year’s fourth quarter gross profit was $431 million, or 14.9 percent of net sales. The gross profit rate increase compared to last year is primarily driven by higher gross margins and vendor allowances as well as lower inventory shrink costs.
Selling and administrative expenses in the fourth quarter were $400 million and included a $41 million asset impairment charge and a $1 million pension settlement charge. When adjusted for these items, selling and administrative expenses were $358 million, or 12.3 percent of net sales. Selling and administrative expenses in last year’s fourth quarter were $356 million and included $6 million of store closure charges and costs. When adjusted for these items, last year’s selling and administrative expenses were $350 million, or 12.1 percent of net sales. The increase in the adjusted selling and administrative expenses rate compared to last year was primarily driven by higher employee costs, partially offset by lower pension expense.
Net interest expense for the fourth quarter was $40 million which included $12 million in unamortized financing cost charges. When adjusted for this item, net interest expense was $28 million. Last year’s fourth quarter net interest expense was $47 million which included $10 million in debt refinancing costs and unamortized financing cost charges. When adjusted for these items, last year’s fourth quarter interest expense was $37 million. The decrease in adjusted net interest expense was primarily driven by lower outstanding debt balances associated with the use of proceeds from the sale of Save-A-Lot.
Income tax benefit was $9 million for the fourth quarter compared to $0 million in last year’s fourth quarter. The fourth quarter of both years included discrete items that impacted the effective tax rate.
Fourth quarter Wholesale net sales were $1.79 billion, compared to $1.74 billion last year, an increase of 3.0 percent. The net sales increase is primarily due to sales to new customers and increased sales from new stores operated by existing customers, partially offset by stores from the prior year no longer being supplied by the Company.
Wholesale operating earnings in the fourth quarter were $64 million, or 3.6 percent of net sales. Last year’s Wholesale operating earnings in the fourth quarter were $50 million, or 2.9 percent of net sales. The increase in Wholesale operating earnings was driven by higher gross margins and vendor allowances.
Fourth quarter Retail net sales were $1.07 billion, compared to $1.11 billion last year, a decrease of 3.2 percent. The net sales decrease reflects negative identical store sales of 5.8 percent, partially offset by sales from acquired and new stores.
Retail operating loss in the fourth quarter was $27 million and included a $41 million asset impairment charge. When adjusted for this item, Retail operating earnings were $14 million, or 1.3 percent of net sales. Last year’s Retail operating earnings in the fourth quarter were $30 million, or 2.7 percent of net sales. The decrease in Retail operating earnings, as adjusted, was driven by the impact of lower sales and higher employee costs partially due to acquired and new stores.
Fourth quarter fees earned under services agreements were $42 million compared to $44 million last year.
Net Corporate operating loss in the fourth quarter was $2 million and included $1 million of costs related to a pension settlement charge. When adjusted for this item, net Corporate operating loss was $1 million. Last year’s fourth quarter net Corporate operating loss was $5 million and included $6 million in store closure charges and costs. When adjusted for this item, last year’s net Corporate operating income was $1 million. The decrease in net Corporate operating earnings, as adjusted, was primarily driven by higher employee costs, partially offset by lower pension expense.
Fiscal 2017 included a $577 million after-tax gain on the sale of Save-A-Lot, recorded in Income from discontinued operations, net of tax.
Cash Flows – Continuing Operations
Fiscal 2017 net cash flows provided by operating activities of continuing operations were $308 million, compared to $245 million last year, primarily reflecting lower levels of cash utilized toward operating assets and liabilities. Fiscal 2017 net cash flows used in investing activities of continuing operations were $198 million, compared to $187 million last year, primarily reflecting an increase in capital spending. Fiscal 2017 net cash flows used in financing activities of continuing operations were $1,106 million, compared to $192 million last year, primarily reflecting the required debt prepayments as part of the Save-A-Lot sale.
A conference call to review the fourth quarter and full year fiscal 2017 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 $12 billion. SUPERVALU serves customers across the United States through a network of 2,363 stores including 1,902 stores operated by wholesale customers serviced primarily by the Company’s food distribution business and 217 traditional retail grocery stores operated under five retail banners in six geographic regions (store counts as of February 25, 2017). Headquartered in Minnesota, SUPERVALU has approximately 29,000 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, the matters set forth in this news release and related conference call, 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,” “outlook” 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 operations and initiatives, ability to realize benefits from acquisitions and dispositions, ability to grow sales, reliance on the wholesale customers’ performance, failure to perform services, wind down of the Company’s relationships with Albertson’s LLC and New Albertson’s, Inc., ability to maintain or increase margins or identical store sales, restrictive covenants from indebtedness, labor relations issues, escalating costs of providing employee benefits, intrusions to and disruption of information technology systems, changes in military business, adequacy of insurance, asset impairment charges, fluctuations in our common stock price, impact of economic conditions, commodity pricing, severe weather, disruption to supply chain and distribution network, governmental regulation, food and drug safety issues, legal proceedings, pharmacy reimbursement and health care financing, intellectual property protection, 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.