Struggling supermarket operator and grocery wholesaler Supervalu Inc. posted a second quarter net loss of $111 million, or 52 cents per diluted share, as net sales declined 4.6% to $8.04 billion.

Supervalu Inc., FactSet, Albertsons, Acme, Cub Foods, Jewel-Osco, Lucky, Shaw’s Supermarkets, Save-A-Lot, Independent Business, Leon Bergmann, Janel Haugarth, president and chief executive officer Wayne Sales,

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Supervalu swings to second quarter loss

October 23rd, 2012

MINNEAPOLIS – Struggling supermarket operator and grocery wholesaler Supervalu Inc. posted a second quarter net loss of $111 million, or 52 cents per diluted share, as net sales declined 4.6% to $8.04 billion.

The red ink stemmed from several unusual items, including $45 million for intangible asset impairment, $25 million from store closure impairment charges, $23 million in long-lived asset impairment, $14 million for unamortized financing cost charges, and $4 million related to labor buyout and severance expense. Excluding those items, Supervalu had no loss or profit for the quarter. Analysts had expected earnings of 12 cents per diluted share, according to FactSet.

The top-line decrease reflects Supervalu’s sale of its fuel center business, which had contributed $158 million in sales in the fiscal 2012 quarter, as well as drooping identical-store sales that management attributed to pressured consumers, competitive factors and ongoing investment in competitive pricing.

Sales in its Retail Food division, which includes such supermarket chains as Albertsons, Acme, Cub Foods, Jewel-Osco, Lucky and Shaw’s Supermarkets, among others, fell 7.3% to $5.2 billion, largely a result of a 4.3% drop in identical-store sales. The division posted an operating loss of $82 million.

Supervalu’s Save-A-Lot hard discount grocery division managed a 0.1% increase in sales to $973 million, thanks to 47 net new store openings year over year, as identical-store sales dipped 3.7%. Operating income fell 64% to $18 million.

Meanwhile, sales at Supervalu’s wholesale unit, now called Independent Business, grew 1.1% to $1.87 billion, while operating earnings decreased 10.7% to $50 billion.

On the same day Supervalu released its financial results it announced that Leon Bergmann, who had been in charge of its traditional grocery wholesale division (now called Independent Business), had decided to leave the company. He has been replaced by Janel Haugarth, a 35-year company veteran who led the unit from 2006 to 2011 as president and chief operating officer. She was named executive vice president of merchandising and logistics in 2011. Her new title is president of independent business and business optimization.

During a conference call with analysts, chairman, president and chief executive officer Wayne Sales said that Supervalu had received expressions of interest in the company and was in active dialogues with several parties. Three days earlier the Wall Street Journal had reported that Cerberus Capital Management is preparing a multibillion-dollar bid to acquire the company, quoting unnamed sources. That inspired JPMorgan analyst Carla Casella to upgrade Supervalu’s stock from “underweight” to “neutral,” somehow calculating the probability of a deal at about 50%.

That sufficed to drive Supervalu’s share price up 45% to $3.17, its highest level since July. It has since descended to $2.97 per share as of midday on October 23.

The company plans to reduce its $6.1 billion debt load by about $400 million to $450 million during the current fiscal year, and projects that it will generate between $900 million and $950 million in cash flow from operations, which it plans to use to reduce debt and revamp stores.