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    Supervalu has Strong Q4, Bright Outlook; Sells Scott's to Kroger

    MINNEAPOLIS - As it posted higher-than-expected fourth-quarter profits and a brighter financial forecast for the current year, Supervalu here yesterday also said it is selling its 18-store Scott's Food & Pharmacy unit in northeast Indiana to The Kroger Co. for an undisclosed sum.

    MINNEAPOLIS - As it posted higher-than-expected fourth-quarter profits and a brighter financial forecast for the current year, Supervalu here yesterday also said it is selling its 18-store Scott's Food & Pharmacy unit in northeast Indiana to The Kroger Co. for an undisclosed sum.

    Jeff Noddle, Supervalu's chairman and c.e.o. said the decision to sell the stores - which the company has owned since 1991 -- came "after careful analysis and deliberation, and is ultimately guided by what is best for the company's ongoing success and future growth."

    The stores will become part of Kroger's Central Indianapolis-based division, which currently operates 145 stores under the Kroger, Hilander, Owen's, and Pay Less banners in parts of Indiana, Illinois, Michigan, Missouri, and Ohio. Scott's employs some 1,300 associates, most of whom Supervalu said it expects will be interviewed and offered employment by Kroger.

    Robert Moeder, Kroger's Central division president, said his company will "continue Scott's tradition of great customer service as we expand Kroger in this market" and will continue operations under the Scott's banner.

    The transaction is expected to close later this year.

    As for the highlights of Supervalu's fourth quarter ended Feb. 24, the company earned $119 million, or 57 cents a share, up from $6 million, or 4 cents a share, a year ago. The results took into account charges from the Scott's sale, which cut earnings by 11 cents a share.

    Supervalu's sales shot to $10.3 billion from $4.64 billion a year earlier, boosted by the company's June acquisition of Albertson's premier properties. Sales in the retail food segment, which also gained as a result of the Albertsons deal, totaled $8.2 billion, up from $2.5 billion a year earlier. Same store sales also jumped increased 1.4 percent for the quarter.

    For the full year, Supervalu logged record sales of $37.4 billion compared to $19.9 billion last year, and record net earnings of $452 million compared to $206 million last year. Earnings per share were $2.32 compared to $1.46.

    The full-year results included net after-tax charges of $78 million, or $0.46 per diluted share primarily related to one-time transaction costs, expense from the adoption of FAS 123R related to stock option expensing, the impact of the HITS which did not settle upon close of the acquisition, and charges related to the sale of Scott's Food & Pharmacy stores. Fiscal 2006 full-year results included net after-tax charges of $111 million, or $0.76 per diluted share, primarily related to the sale of Cub Foods stores in Chicago, the sale of Shop 'n Save stores in Pittsburgh, the disposition of Deals stores, and losses incurred from Hurricane Katrina.

    Supervalu raised its fiscal 2008 guidance to $2.68 to $2.87 a share from its previous forecast of $2.58 to $2.77. The new projection includes transaction-related costs of 16 cents to 20 cents a share.

    "Fiscal 2007 marked the transformation of Supervalu into a retail powerhouse holding a significant position in the retail grocery industry with some of the most enviable brands in the market," said Noddle. "Our record fourth quarter showed good momentum and completes a very successful fiscal 2007 year, with full year reported diluted earnings per share of $2.32."

    Supervalu's double-digit earnings growth in fiscal 2007 "clearly demonstrates the highly accretive nature of the acquisition," said Noddle, noting that fiscal 2007 "also marked the successful execution of our business plans including the improvement in our identical store sales on a combined store network basis. We are very well-positioned for the next stage of growth as we implement initiatives designed to further deliver the economics of the acquisition by leveraging our competencies in both retail and supply chain."

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