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    Supervalu Sees Strong Performance, Record Earnings for Q3

    MINNEAPOLIS -- Grocery wholesaler/retailer Supervalu's record performance across both business units in Q3 2006 is a sample of what the company expects to see in the long term, according to chairman and c.e.o. Jeff Noddle.

    MINNEAPOLIS -- Grocery wholesaler/retailer Supervalu's record performance across both business units in Q3 2006 is a sample of what the company expects to see in the long term, according to chairman and c.e.o. Jeff Noddle.

    "We delivered record earnings performance in the quarter on improved sales across both business segments," said Noddle. "At the same time, we continue to invest in exciting new initiatives such as produce, supply chain technology, and the launch of a new natural and organic retail format. We are confident that these programs lay the groundwork for long term success."

    For the quarter, which ended December 3, Supervalu saw net sales of $4.7 billion, compared to $4.6 billion last year, net earnings of $75.2 million, compared to $64.9 million, and earnings per share of 55 cents versus 48 cents in 2005.

    For the 40-week year to date, the company reported net sales of $15.2 billion compared to $15 billion last year, net earnings of $200.2 million compared to $292.9 million, and earnings per share of $1.47 compared to $2.17.

    Supervalu's retail food segment sales were $2.5 billion, a 1.9 percent increase compared to last year. According to the company, the sales performance primarily reflects new store openings partially offset by the impact of higher store closings, primarily at Save-A-Lot.

    Comparable store sales growth overall for the quarter was negative 0.9 percent; however, comps were positive at company-operated Save-A-Lot stores. When adjusted for planned in-market store expansion, third quarter comparable store sales were negative 0.5 percent. Not including store closures, sales to Save-A-Lot licensed stores improved from the prior year. Total retail square footage, including licensed stores, increased by approximately 1.5 percent from last year's third quarter, with Save-A-Lot's total square footage essentially flat compared to the prior year.

    Reported retail operating earnings for the third quarter were a $104.5 million compared to $101.3 million in last year's third quarter, a record, according to the company. Reported operating earnings as a percent of sales were 4.2 percent, essentially flat versus last year's Q3, reflecting benefits of merchandising programs offset by soft sales and higher expenses -- primarily utilities and bank fees, the company noted.

    New store activity since last year's third quarter, including licensed stores, resulted in 54 new stores, opened and acquired, and 47 store closings for a total of 7 net new store openings. During the last 12 months, new store openings included 43 extreme value stores and 11 regional banner stores. Store closings for the last 12 months included 44 extreme value stores and 3 regional banner stores. As of December 3, 2005, Save-A-Lot, including licensed operations, operated 1,277 stores, of which 500 were combination stores, compared to 441 combination stores at the end of last year's Q3.

    For the latest 40 weeks, Supervalu's retail segment reported net sales of $8.1 billion compared to $8 billion last year; and operating earnings of $271 million, compared to $335.3. Fiscal 2006 operating earnings include pretax charges of approximately $62 million related to the plan to sell 20 Pittsburgh stores, and losses incurred from the impact of Hurricane Katrina.

    Supervalu's Supply Chain Services segment's Q3 net sales were $2.2 billion, an increase of 4.4 percent from last year. The sales increase primarily reflects the third-party logistics service business acquired in February of 2005 and new business growth that offset customer attrition.

    Reported supply chain services operating earnings for the Q3 were $53.9 million compared to $59.5 million last year. Reported operating earnings as a percent of sales were 2.4 percent compared to 2.8 percent last year, primarily reflecting approximately $5.5 million pretax of start-up costs associated with technology investments and new produce initiatives.

    For the first 40 weeks of fiscal 2006, the company's supply chain services segment reported net sales of $7.1 billion, compared to $7 billion last year. Operating earnings were $173 million, versus $175.2 million. Fiscal 2006 includes the acquisition of the third party logistics business in February of 2005 and pretax start up costs of approximately $21 million relating to growth initiatives.

    Supervalu expects fiscal 2006 earnings per share to fall within a range of $1.98 to $2.03. Noddle added, "Supervalu will continue to transform itself with exciting and bold programs. [These include] our new small box, natural and organic retail format, Sunflower Market, as well as the systemwide rollout of the Nature's Best private label, the application of innovative technologies for supply chain efficiency, and the ramp up of our new W. Newell & Co produce business. These programs will differentiate Supervalu in the grocery food channel and position us for continued success."

    As of December 3, 2005 Supervalu's retail store network consisted of 1,546 stores in 40 states, including 1,277 extreme value stores, (287 corporate-owned Save-A-Lot stores, 852 licensed Save-A-Lot stores, and 138 Deals stores); and 269 regional banner stores (Cub Foods, Shop 'n Save, Shoppers Food & Pharmacy, bigg's, Farm Fresh, Scott's Foods and Hornbacher's stores). Supervalu serves as primary supplier to approximately 2,200 stores and Supervalu's own regional banner store network of 269 stores. In total, the company currently has approximately 57,000 employees.

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