Nobody can accuse Supervalu (SVU) of not producing news. In a seven day period in mid-April, theEden Prairie, MN retailer/wholesaler released its fourth quarter and year-end financials and also reorganized senior management at several of its divisions.
In the latter development, Acme Markets president Dan Sanders will be leaving the company’s Malvern, PAdivision to become president of the company’s larger Southern California unit. That move was triggered following the announcement that veteran Supervalu executive Sue Klug will be leaving the company.
Keith Wyche, most recently president of SVU’s 67 store Cub Foods division (with units in Illinois and Minnesota), has been named president of Acme. According the company, Wyche has improved sales trends and grown profitability since joining Cub in 2010. In addition to guiding the division’s strategy, he has been an active member in the community. Wyche began his career in sales, marketing and management roles with AT&T and IBM. Prior to coming to Supervalu, he was president ofU.S.operations for Pitney Bowes’ Pitney Management Services division. Before that, he held various sales leadership and general management positions with Convergys and Ameritech. He is on the corporate board of directors for WMS Industries.
On the sales and earnings front, it was another dismal quarter and fiscal year for the company. For fiscal 2012, ended February 24, Supervalu posted a net loss of $1.04 billion on overall sales of $36.1 billion. Still, that bettered the even more abysmal 2011 fiscal performance where the firm lost $1.5 billion on total sales of $37.5 billion.
And Supervalu’s fourth quarter loss was $424 million (vs. profit of $95 million in the corresponding period last year) on overall sales of $8.2 billion, a $500 million decline from last year’s 4th quarter.
However, since Supervalu chose once again to take a huge non-cash goodwill and intangible asset impairment charge, CEO Craig Herkert told analysts and shareholders of how happy he was with the Supervalu’s fiscal progress.
“I am pleased with the launch of our business transformation this year and the initial results from that strategy which helped us deliver our adjusted earnings results of $1.25 for fiscal 2012,” said Herkert. “Our disciplined approach to pre-funding price investments is allowing us to invest across markets, categories and items. We remain focused on delivering improved value for our customers and meeting the specific needs of each community we serve.”
Other key metrics related to the 4th quarter and year-end financials release include 4th quarter
retail food net sales of $6.4 billion compared to $6.7 billion last year. The change in net sales primarily reflected a 1.9 percent drop in same-store sales, previously announced store closures and the sale of Supervalu’s fuel centers. Gross profit margin for the fourth quarter was $1.9 billion, or 22.8 percent of net sales, compared to $2 billion or 23.3 percent of net sales last year.
Fourth quarter independent business net sales were $1.9 billion compared to $2.0 billion last year, a decrease of 5.5 percent, which the company primarily attributed to Target’s transition to self-distribution and the divestiture of Total Logistic Control.
Retail food operating loss in the fourth quarter was $335 million and included $525 million in pre-tax goodwill and intangible asset impairment charges and $15 million in pre-tax employee-related costs related to a previously announced reduction in workforce. Last year’s retail food operating earnings were $131 million, or 2.0 percent of net sales, and included $75 million in pre-tax store closure and employee-related costs as well as a $30 million pre-tax trade name impairment charge. When adjusting for these items, retail food operating earnings in the fourth quarter of 2012 were $205 million, or 3.2 percent of net sales compared to $236 million, or 3.5 percent of net sales last year. The decline in retail food operating earnings as a percent of net sales was attributable to price investments, additional advertising expense, and the impact of sales deleveraging, all of which were partially offset by the company’s cost reduction initiatives.
Independent business operating earnings in the fourth quarter were $44 million, or 2.3 percent of net sales, and included $5 million in pre-tax employee-related costs for a previously-announced reduction in workforce. Last year’s independent business operating earnings were $120 million, or 6.1 percent of net sales, and included a $62 million pre-tax gain from the sale of Total Logistic Control. When adjusting for these items, independent business operating earnings in the fourth quarter of 2012 were $49 million, or 2.6 percent of net sales compared to $58 million, or 2.9 percent of net sales, last year. The decline in independent business operating earnings as a percent of net sales was primarily attributable to Target’s transition to self-distribution, the impact of the divestiture of Total Logistic Control, and a slightly higher LIFO charge.
Year-to-date capital expenditures were $711 million compared to $604 million for the same period last year.
In addressing guidance, Herkert commented, “We are committed to fair price plus promotions and will intensify our efforts as we enter the second year of our business transformation. As we move into fiscal 2013, we see another year of improving identical store sales and will continue to take appropriate steps to deliver greater value to our customers and move closer to becomingAmerica’s Neighborhood Grocer.”
Supervalu said it expects 2013 earnings on a diluted per share basis to be within the $1.27-$1.42 range.
Supervalu noted that its fiscal 2013 guidance includes the following assumptions:
Net sales for the 52-week fiscal year are estimated to be $35.0 billion to $35.5 billion, which includes the reduction of approximately $500 million in sales from the sale of the majority of the company’s fuel centers; Identical store sales growth, excluding fuel, is projected to be negative 1.0 percent to negative 2.0 percent; sales in the independent business segment are expected to be up modestly; debt reduction is estimated to be approximately $400 to $450 million; capital spending is projected to be approximately $675 million; Supervalu expects to complete approximately 100 store remodels and increase Save-A-Lot’s store count by approximately 50 stores, including licensed locations; the effective tax rate is estimated to be approximately 36 percent; and weighted-average diluted shares are estimated to be approximately $213 million.
With Sanders moving to Southern California land Wyche relocating to theDelawareValley, Supervalu has named Brian Audette to serve as president of Cub Foods. Audette began his grocery career working in Pick ‘N Save stores inWisconsin. He joined Supervalu in 1991, gaining more than 20 years of experience in positions of increasing responsibility within category management, marketing and merchandising. He served as the group vice president of independent sales, marketing and merchandising within the supply chain organization before being named business transformation officer in 2010. Last year, he was promoted to group vice president of merchandising transformation and process improvement. Audette’s work has given him in-depth exposure to both the retail and wholesale areas of the business, and his intimate knowledge of the needs of the independent retailer will provide a strong foundation for his new role with Cub’s franchise owners, Supervalu stated.
Commenting on the leadership moves, Pete Van Helden, Supervalu’s EVP-retail operations noted, “Dan, Keith and Brian embody the entrepreneurial spirit that is at the core of our hyperlocal strategy. Coupled with their combined experience in the industry and their working knowledge of Supervalu’s strategy and operations, I believe they are ideally suited for their new responsibilities.” Van Helden added, “I have full confidence in their abilities to lead their new teams to achieve our sales, profitability and growth objectives.”