Supervalu 4Q profit up on lower interest expense, sales rise

MINNEAPOLIS -- The grocer Supervalu said fourth-quarter profits jumped 30 percent, despite bargain-hunting shoppers who are being squeezed by food inflation.

Supervalu saw some profit growth from its stores and food distribution businesses. Paying down debt and cutting administrative expenses helped, too. Supervalu became one of the nation's largest grocers with its 2006 acquisition of most of Albertsons grocery stores.

Its shares jumped more than 5 percent Thursday.

Chairman and CEO Jeff Noddle said food inflation has been running in the high 3 percent range. Customers are coming to Supervalu stores less often, but spending more each time, he said.

"We are seeing evidence of customers managing their budget and focusing on value" by waiting for sales and promotions, clipping coupons, and buying economy sizes and store brands, he said. Supervalu has been rapidly expanding its own store brands recently, which are currently about 16 percent of retail sales.

Supervalu chains include Cub Foods, Save-A-Lot, Jewel-Osco, and Shop 'n Save.

Retail sales declined slightly to $8.1 billion because of store closures. Sales at stores open at least a year were flat.

Still, Supervalu Inc. profits for the quarter that ended Feb. 23 rose to $156 million, or 73 cents per share, from $120 million, or 57 cents per share in the year-ago quarter. The company said it earned 77 cents per share excluding acquisition costs.

Revenue climbed less than 1 percent to $10.39 billion, from $10.3 billion.

Analysts polled by Thomson Financial expected 71 cents per share on revenue of $10.17 billion.

Supervalu is also a food distributor, and operating earnings in that business rose $20 million, to reach $75 million. Retail operating earnings rose by $11 million to $374 million.

Eden Prairie-based Supervalu has been paying down debt since buying most of Albertsons stores in 2006. Including leases, Supervalu debt now stands at $8.8 billion, down from $9.5 billion a year ago.

Its bill for interest dropped to $157 million for the quarter, compared with $173 million a year ago.

Noddle said the company beat its own goal of paying off $400 million by June, and will pay off about the same amount in the current fiscal year. Because 30 percent of its debt is at variable rates which have been falling, that has become a lot easier. The company said it would use the extra savings for sales initiatives.

In fiscal 2009, Supervalu forecast earnings of $3.10 to $3.25 per share excluding costs. Analysts had been anticipating $3.07 per share. It expects sales of $45 billion to $45.5 billion, including $800 million from an extra week during the fiscal year.

Supervalu warned that inflation and a sluggish economy will influence customer spending. It said it expects same-store sales to grow 1 percent to 2 percent not counting fuel, with much of that growth happening in the second half of the year.

This year costs are rising because higher commodity prices are showing up in packaged foods. Higher fuel prices are also a factor, Noddle said.

"Inflation continues at about the same pace and strength that we saw at the end of the third quarter," he said.

For the full year, Supervalu earned $593 million, or $2.76 per share, up from $452 million, or $2.32 per share during the prior year. Revenue rose to $44.05 billion, from $37.41 billion a year ago.

Supervalu shares rose $1.55, or 5.3 percent, to $30.60 in afternoon trading.