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    Supervalu Profits Drop in Q4 and '06; Albertsons Deal On Track

    MINNEAPOLIS -- Dragged down by charges related to divesting some operations and related cost-cutting initiatives to improve its supply chain network, fourth quarter profits for Supervalu Inc. here dropped more than 93 percent.

    MINNEAPOLIS -- Dragged down by charges related to divesting some operations and related cost-cutting initiatives to improve its supply chain network, fourth quarter profits for Supervalu Inc. here dropped more than 93 percent.

    The wholesaler/retailer reported earnings of $6 million, or 4 cents per share, for the fourth quarter ended Feb. 25, which represents a sharp decline from the $92.9 million, or 65 cents per share ratio the company netted during the same period last year. Earnings for the full year 2006 dropped 47 percent to $206 million, or $1.46 per share, from a profit of $389 million, or $2.71 per share in 2005.

    Supervalu said the declines are a result of $72.4 million it spent in the fourth quarter to close some of its stores in preparation for its purchase of Albertson's Inc., for which Supervalu will pay about $6.3 billion in stock and cash and assume some $6 billion in Albertson's debt.

    Sales at Supervalu's retail stores also declined to $2.53 billion from $2.55 billion, while same store sales fell 1.1 percent in the quarter.

    "Fiscal year 2006 was the year we mapped out our vision for the future, invested in our business and then focused our energies on the activities necessary to effectively combine our operations with the premier retail properties of Albertson's," said Jeff Noddle, chairman and c.e.o., clearly focused on the challenges ahead. Noddle said the he expected to name an executive leadership team for the new Supervalu in early May.

    Full-year results of the retail group included net after-tax charges of $130 million, primarily related to the sale of Cub Foods in Chicago, 20 corporate Shop 'n Save stores in Pittsburgh, and costs related to supply chain growth initiatives, asset impairment related to the planned disposition of its Deals stores, losses incurred from Hurricane Katrina, costs related to acquisition activities, and restructure charges primarily associated with changes in estimates on exited real estate.

    Said Noddle: "The reported results for fiscal 2006 include the divesture of certain non-strategic retail properties, as well as the sale of the Cub Foods stores in Chicago to facilitate the pending acquisition. Our efforts are fully directed toward bringing the acquisition to successful completion. Our significantly expanded footprint of approximately 2,500 stores will maximize our scale and allow us to deliver the economics of our combined enterprise. Fiscal 2007 will be the year we begin the transformation of Supervalu into a national retail and pharmacy powerhouse."

    Noddle also said the company intends to provide full year guidance of the combined new enterprise, "soon, hopefully by mid-May, and we are still planning for a June close. I know I speak for the entire team when I express my excitement and confidence in our future."

    New store activity since last year's fourth quarter, including licensed stores, resulted in 68 new stores, opened and acquired, and 85 store closings. During fiscal 2006, new stores opened include 55 extreme value stores and 13 regional banner stores. Fiscal 2006 store closings include 49 Save-A-Lot stores and 36 regional banner stores including Cub Chicago and Shop 'n Save/Pittsburgh. Save-A-Lot, including licensees, operated 1,154 stores, of which 445 were combination stores compared to 394 combination stores at the end of fiscal 2005.

    As of February 25, 2006, Supervalu's retail store network consists of 1,381 stores in 40 states, including 1,154 extreme value stores, (292 corporate-owned Save-A-Lot stores, 862 licensed Save-A-Lot stores); and 227 regional banner stores (Cub Foods, Shop 'n Save, Shoppers Food & Pharmacy, bigg's, Farm Fresh, Scott's Foods, Hornbacher's and Sunflower Market stores). Store counts are adjusted for the planned sale of Deals and Shop 'n Save/Pittsburgh.

    Supervalu serves as primary supplier to approximately 2,200 stores and its own regional banner store network of 227 stores.

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