Supervalu Inc. reported a $1.47 billion quarterly loss and cut its sales and profit forecasts for the second time in three months, reflecting the weak economy and stiff price competition battering food retailers.
Identical-store sales in the 12-month period that began in March are expected to fall 5.5%, excluding fuel, from the previous year, Supervalu said in a statement today. In July, the Eden Prairie, Minn.-based grocery chain projected a 5% decline.
Traditional supermarkets are struggling as high unemployment prompts consumers to tighten budgets and seek bargains at discount chains or club stores, such as Wal-Mart Stores Inc. and Costco Wholesale Corp. While the food deflation of 2009 was thought to have abated earlier this year, fierce competition still makes it difficult for retailers to raise prices.
âOur sales performance continues to reflect a difficult operating environment,â Craig Herkert,
Supervaluâs chief executive officer, said in todayâs statement. Additionally, Supervaluâs recent turnaround effort âwill take longer than originally anticipated,â Herkert said.
During the past two years, Supervalu closed or sold nearly 100 stores, and earlier this year reduced the number of items offered per store. The company hasnât said how many fresh produce offerings would be reduced, if at all. More recently, Supervaluâs traffic-boosting efforts included a âWin with Fresh Produceâ promotion touting locally grown fruits and vegetables.
Still, Supervalu has performed worse than competitors such as Kroger Co. and Safeway Inc. and was also rumored to be a takeover target. Supervalu operates more than 2,300 U.S. stores under about a dozen branded retail chains, including Albertsons, Cub Foods, Jewel-Osco and Save-A-Lot.
Major U.S. supermarkets probably will remain under pressure for the foreseeable future, said Ajay Jain, an analyst with Hapoalim Securities in New York.
Todayâs results offer âa fresh dose of reality to those looking for meaningful signs of recovery in the food retail sector,â Jain said in a report on Supervalu today.
Supervalu is âa structurally challenged food retailer,â Jain said. But âwe think there has been a growing (mis)perception that the operating environment across the sector is set to significantly improve during (the second half of 2010) as the sector cycles against the heavy deflationary environment from late last year.â
For the three months ended Sept. 11, Supervaluâs fiscal 2011 second quarter, the company posted a net loss of $1.47 billion, compared with profit of $74 million a year earlier, according to todayâs statement. Net sales fell 8.5%, to $8.66 billion.
Identical-store sales fell 6.4% during the quarter, Supervalu said. The sales reflect stores open four full quarters and are a key gauge of retailer performance. By comparison, Krogerâs identical-store sales excluding fuel rose 2.7% in the companyâs most recent quarter, while Safewayâs sales fell 2%.
Also today, Supervalu lowered its adjusted 2011 earnings forecast to $1.40 to $1.60 per share from a previous estimate of $1.75 to $1.95.
In early afternoon trading, Supervalu shares fell $1.54, or 12%, to $10.86. The stock is down 37% over the past 12 months.