Asset and goodwill impairment charges resulted in a big net loss for Supervalu Inc. in fiscal 2011, while net earnings and operating profit declined in the fourth quarter as sales continued to recede.


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Supervalu sees 4Q earnings dip, posts fiscal-year loss

April 15th, 2011

MINNEAPOLIS – Asset and goodwill impairment charges resulted in a big net loss for Supervalu Inc. in fiscal 2011, while net earnings and operating profit declined in the fourth quarter as sales continued to recede.

However, results for the final period were not as dire as Wall Street analysts had forecast for the supermarket retailer and wholesaler. 

Supervalu reported Thursday that net earnings for the 12-week fourth quarter ended February 26 dipped 2.1% to $95 million, or 44 cents per diluted share, from $97 million, or 46 cents per share, in the fiscal 2010 quarter.

The most recent results include after-tax charges of $47 million, or 22 cents per share, for store closures and employee-related costs, as well as an after-tax charge of $18 million, or 9 cents per share, for impairment of intangible assets. Those hits were fully neutralized, however, by a gain of $65 million, or 31 cents per share, on the sale of the company’s Total Logistic Control unit.

Results for the 2011 quarter easily exceeded the average estimate of 33 cents per share from analysts polled by Factset.

The 2010 quarter, meanwhile, reflected $34 million, or 16 cents per share, in net after-tax charges stemming from the closure of nonstrategic stores, retail market exits in Connecticut and Cincinnati, and fees received for the early termination of a supply agreement. Factoring out the impact of special items in the year-ago period, net income fell 27.5% from an adjusted $131 million in the prior-year quarter.

Consolidated sales in the fourth quarter declined 5.9% to $8.66 billion from $9.21 billion, reflecting the impact of store closings and another sharp decline in identical-store sales.

Full-year 2011 results swung to a net loss of $1.51 billion, or $7.13 per share, from a profit of $393 million, or $1.85 per share, in fiscal 2010. The red ink includes goodwill and intangible asset impairment charges totaling $1.74 billion after taxes, or $8.23 per share; retail market exit and store closure costs of $77 million, or 37 cents per share; and severance, labor buyout and other costs totaling $51 million, or 23 cents per share. Those charges were partially countered by the aforementioned gain of $65 million after taxes (31 cents per share).

Fiscal 2010 earnings were reduced by a net of $39 million from the store-closing and market exit charges, and the partially offsetting early termination fee. Backing out special items in both years, adjusted full-year earnings plunged 31.5% to $296 million, or $1.39 per diluted share, from $432 million, or $2.03 per share.

Consolidated sales for fiscal 2011 fell 7.5% to $37.53 billion from $40.60 billion.

Including $30 million in goodwill and intangible asset impairment charges, fourth quarter operating earnings dove 23.4% to $219 million.

"In the fourth quarter, our transformation initiatives helped us execute more effective promotions that contributed to stronger than anticipated results," stated Craig Herkert, Supervalu chief executive officer and president. "This provides us a foundation to continue to deliver upon our business transformation plan as we move into fiscal 2012."

Full-year operating results shifted to a $976 million loss from a $1.20 billion profit in fiscal 2010. The red ink was fueled primarily by $1.87 billion in impairment charges.

Fourth quarter operating income for Supervalu’s retail food unit plummeted 40.7% to $131 million. The most recent results include $30 million of asset impairment charges and a $75 million charge for store closures and employee-related costs, while the fiscal 2010 quarter reflected $55 million in charges for market exits. Adjusting for those items, operating profit would have dropped 14.5% to $236 million.

Retail sales for the final 12 weeks slid 7.1% to $6.69 billion, driven by store closures and identical-store sales (excluding fuel) that plunged 5%.

During a conference call chief financial officer Sherry Smith attributed the 12th straight quarterly decline in identical-store sales to a 4.6% drop in transaction count and a 40-basis-point decline in transaction size.

For the year, the retail food unit booked a $1.21 billion operating loss, in contrast a $989 million profit in fiscal 2010. The shortfall reflects the previously mentioned $1.87 billion impairment charges as well as $172 million of other charges related mainly to the sale or closure of stores, employee-related costs and the impact of a labor dispute at the company’s Shaw’s banner. Fiscal 2010 results included the aforementioned $55 million in market exit costs. Factoring out those items, full-year adjusted operating profit tumbled 20.5% to $830 million.

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