Supervalu Q2 sees 4.6% net sales decrease

MINNEAPOLIS — On the heels of its Monday announcement that it would be selling its Save-A-Lot business, Supervalu on Wednesday reported it Q2 2016, reporting a 4.6% decrease in net sales compared to last year.  The company’s CEO, Mark Gross, acknowledged the decrease in sales while noting that he expects higher wholesale sales in the second half of the year to be higher than last year as it adds customers and grows its base business. 

 

“As we expected, the transformation of our business continues to take time, but I am optimistic about our ability to grow our wholesale business by adding new customers, securing long-term supply agreements with existing customers, and expanding overall product sales to all customers,” Gross said. “We expect wholesale sales in the second half of this year to be higher than last year as we add new customers, grow our base business, and cycle select customer losses from last year.”

 

The company saw $3.87 billion in net sales in Q2, down from last year’s $4.6 billion by about $197 million. Wholesale segment sales decreased by 5.5% and the company’s retail identical-store sales showed a 5.9% decrease. Save-A-Lot’s identical-store sales decreased 5%. The company’s net earnings from continuing operations were $31 million, which included $6 million in after-tax costs related to Save-A-Lot’s potential separation and severance costs. Adjusting for these factors, the company posted $37 million in Q2 net earnings. 

 

Though the company’s gross profit — $562 million, or $563 million adjusted for store closure costs — did not increase over last year’s $583 million gross profit, the company’s gross profit rate increased slightly, with it making up 14.5% of net sales this year, compared to the same quarter last year, when it made up 14.4% of net sales. Selling and administrative expenses were $481 million for the quarter when adjusted for a received $9 million supply agreement termination fee, $3 million of store closure costs and $1 million in Save-A-Lot separation costs. The company sai its income tax expense was $18 million in Q2, or 36.2 percent of pre-tax earnings. In the same period last year, Supervalu paid $19 million in income tax, about 40% of pre-tax earnings.

 

The company said it expected the Save-A-Lot sale to be completed by January 31, 2017, and that as a result of the agreement, it would present Save-A-Lost business being disposed as discontinued operations in future earnings releases and filings.