Supervalu expects sales to decline a second consecutive year as the grocery chain continues store closings and other cost-cutting measures.
Net sales for Supervalu’s fiscal 2011, which began in March, are projected at $39 billion, down 3.9 percent from $40.6 billion in 2010, the Eden Prarie, Minn.-based company cited in a quarterly financial statement today. Fiscal 2010 sales were down 9 percent.
Supervalu, despite a dozen branded retail outlets and more than 2,300 stores, has been a shrinking market for fresh produce and meat for more than a year. The company has struggled to stay competitive with lower-priced competitors such as Wal-Mart Stores and Costco Wholesale Corp.
The recession and food deflation squeezed traditional grocery chains’ profits over the past two years. But compared with peers, Supervalu’s near-term outlook “remains even more troubled,” Ajay Jain, an analyst with Hapoalim Securities, said in a report today.
Supervalu estimated its 2011 per-share profit will be unchanged to down as much as 20 cents from $1.85 in 2010, partly because of expenses to exit markets in Connecticut and Cincinnati.
“There will be challenges to overcome,” Supervalu chief executive Craig Herkert said in today’s statement. But Supervalu expects to deliver “solid” earnings in fiscal 2011 and “execute our vision of becoming America's neighborhood grocer,” he added.
According to Herkert, Supervalu will have “an unrelenting focus on cost reduction” to position the company for growth in fiscal 2012 and beyond.
In addition to closing stores, Supervalu also has reduced the number of items offered per store. The company hasn’t said how many fresh produce or meat offerings would be reduced, if at all. Cost cuts have applied to Supervalu’s produce business. Last year, the company said it would consolidate produce and floral purchases.
Despite slumping sales, Supervalu’s profit has improved. During the quarter ended Feb. 27, Supervalu posted net income of $97 million, or 46 cents a share, including $34 million in after-tax charges for store closings, the company said. Supervalu lost $201 million during the same period a year earlier.
Net sales in the quarter fell 15 percent to $9.2 billion.
Shares of Supervalu, which operates chains including Albertsons, Jewel-Osco and Save-a-Lot, fell 5 cents, or 0.3 percent, to $17.09 in morning trading today. The stock is up 33 percent this year.