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Supervalu has begun preparations for a possible spin-off of its Save-A-Lot business into a stand-alone, publicly traded company.
“Today’s announcement reflects our commitment to continuing to explore ways to maximize value for our shareholders,” said Sam Duncan, Supervalu president and CEO. “We believe a separation of our Save-A-Lot business could allow Save-A-Lot, our Independent Business and our Retail Food banners to better focus on their respective operations, and pursue strategies specific to their business characteristics and growth potentials, for the benefit of our shareholders, customers, licensees and employees.”
Save-A-Lot currently operates 1,335 stores of which 430 are corporately owned and about 900 are operated by licensee owners. In the past 18 months, the banner has worked to reposition its brand by focusing on fresh meat and produce and remerchandising its stores. In the first quarter of fiscal 2016, Save-A-Lot stores reported net sales of $1.4 billion, an increase of nearly 4 percent from the same period last year.
Supervalu Q1 Fiscal Year Results
Supervalu also released its Q1 results for fiscal 2016, posting net sales of $5.4 billion and net earnings from continuing operations of $63 million, up from $48 million in Q1 of last year. All three business segments – Independent, Save-A-Lot and Retail Food – all reported increases over the same period last year.
“I'm pleased with our bottom line and ability to manage to these results in spite of softer sales at Save-A-Lot and in our Retail Food stores. We have plans in place and operationally we remain well positioned,” Duncan added.
Gross profit for Q1 was $810 million, or 15 percent of net sales. Last year’s Q1 gross profit was $755 million, or 14.4 percent of net sales. The increase in gross profit rate compared to last year was primarily driven by higher base margins across all three segments.
Q1 Independent Business net sales were $2.46 billion, compared to $2.42 billion last year, an increase of 1.7 percent. Independent Business operating earnings in the first quarter were $77 million, or 3.1 percent of net sales. Last year’s Independent Business operating earnings in Q1 were $66 million and included $1 million of pre-tax employee severance costs.
Q1 Save-A-Lot net sales were $1.41 billion, compared to $1.36 billion last year, an increase of 3.8 percent. The sales increase reflects the impact of new store openings and a network identical store sales increase of 0.6 percent. Identical store sales for corporate stores within the Save-A-Lot network were up 2.8 percent. Save-A-Lot operating earnings in Q1 were $51 million, or 3.6 percent of net sales, compared to $46 million, or 3.4 percent of net sales, last year.
Retail Food Q1 net sales were $1.47 billion, compared to $1.43 billion last year, an increase of 3 percent. Retail Food operating earnings in Q1 were $33 million, or 2.2 percent of net sales, compared with $30 million, or 2.1 percent of net sales, last year.