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MINNEAPOLIS -- Pointing to insufficient volume and growth prospects to justify continued capital investment in the market, Supervalu, Inc. announced today it was selling its Denver-based operations, which include nine retail stores and a warehouse facility.
Four out of nine Cub Food retail stores and a distribution warehouse will be sold to Kroger while it negotiates the sale of the other five retail stores. Financial terms of the transaction with Kroger, which is expected to close by late November 2003, were not disclosed.
"The decision to sell our Denver-based operations is the result of a thoughtful and disciplined asset rationalization program that we began implementing more than two years ago," Jeff Noddle, Supvalu's chairman and c.e.o., said in a statement.
"Neither our retail nor our distribution operations in Denver generated sufficient volume or growth prospects to justify a continued capital investment. By deploying our capital to Supervalu's best growth opportunities in both retail and distribution, we can build upon the successes in our core markets while improving our return on invested capital. Today's announcement and other efforts we have implemented continue to add to improved return for our shareholders."
The four stores, each averaging approximately 66,000 square feet in size, will become part of the company's King Soopers division, which currently operates 129 stores in Colorado under the King Soopers and City Market banners. The acquired stores will operate under the King Soopers banner following an extensive remodeling, Kroger said.
"Denver is an important area that offers significant opportunities for future growth," said Russ Dispense, King Soopers president. "The acquisition of these four stores will enable us to offer greater convenience and value to our customers. We look forward to interviewing Cub employees for jobs at the stores."
Added Noddle: "We have been honored to serve some fine retailers in the Rocky Mountain area, and we will work hand in hand with them, providing logistics and retail support as they transition to alternate supply solutions. We also want to recognize the efforts of our Denver retail and distribution work force. We sincerely appreciate their hard work over the years, and we will work with them in transitional and outplacement efforts."
Supervalu said it expects the transaction to generate net cash proceeds after closing costs and a loss on the sale of the assets. The revised earnings per share guidance for fiscal 2004 is $2.04 to $2.10. The potential financial impact of the current strike in St. Louis is unknown at this time and not included in the fiscal 2004 earnings guidance.
In fiscal 2005, the sale of the Denver-based operations will increase return on invested capital and modestly improve earnings per share on a slightly reduced revenue base. Supervalu says it will provide earnings guidance for fiscal 2005 in conjunction with the release of its third quarter results in December.