Supervalu’s first-quarter net income drops 40 percent as sales fall 9.6 percent

Supervalu’s first-quarter net income falls 40 pct

PORTLAND, Ore. — Supervalu Inc.’s first-quarter net income fell 40 percent as shoppers kept a tight lid on spending and competition increased.

The national grocery chain said Tuesday that it was disappointed in the results but maintained its forecast for adjusted earnings for the year, saying its cost-cutting and other turnaround efforts will gain traction.

“This was a tough quarter for us but one that ushered in positive operational progress,” CEO Craig Herkert said during a conference call with investors Tuesday.

The company, which operates Albertsons, Jewel-Osco, Shaw’s and other grocery chains, reported net income of $67 million, or 31 cents a share, for the quarter that ended June 19. That’s down from $113 million, or 53 cents per share, a year earlier.

Excluding the costs of closing stores in Connecticut and Ohio and a labor dispute, the company earned 43 cents per share — beating the average forecast for 42 cents per share from analysts surveyed by Thomson Reuters.

Revenue fell 9.2 percent to $11.5 billion, falling short of Wall Street’s expectation for $11.67 billion.

Supervalu, based in Eden, Minn., recently hired Herkert, a former Wal-Mart Stores Inc. leader and other managers leading its turnaround effort, which includes cutting costs and debt, closing and selling stores and lowering inventory. It says those moves will pay off in the long term.

Supervalu’s revenue at stores open at least a year — a key figure for retailers because it excludes the effects of stores opening or closing during the year — fell 7.2 percent for the quarter. Excluding Shaw’s stores — which the company plans to cut entirely — the figure fell 6.5 percent.

Shoppers are relying heavily on coupons and lower-priced store brands and buying less overall, the company said, predicting this will continue to weigh on its revenue and net income.

“We are working to address the consumer’s needs in this very tough economic environment that we are in, and of course we believe that we will continue to be in for some time,” Herkert told investors. “We are not optimistic that somehow the economic environment turns the corner any time soon.”

Herkert said the company still faces challenges. But he said continuing to control inventory and costs and improve its appeal with shoppers should stabilize Supervalu’s earnings over the year.

Supervalu continues to expect to earn between $1.75 and $1.95 per share for the fiscal year, excluding one-time items. Analysts expect $1.73 per share.

On a non-adjusted basis, however, the company now expects to earn between $1.61 and $1.81 per share, down from $1.65 to $1.85. Those figures include 7 cents per share each for the cost of store closures and the labor dispute at Shaw’s.

Shares of Supervalu rose 27 cents, or 2.3 percent, to $11.85 in midday trading.

AP Business Writer Emily Fredrix contributed to this report from New York.