NEW YORK (AP) — Supervalu Inc.’s painful effort to turnaround its business is starting to pay off.
The nation’s third-largest supermarket operator with 2,400 U.S. stores said Tuesday that it swung to a loss in the fiscal fourth quarter as a result of impairment charges and costs related to store closures and layoffs. But excluding those items, the company’s results beat Wall Street expectations, sending its shares up 10 percent.
The better-than-expected results come as Supervalu looks to fix its ailing business, which has suffered over the years as competitors have lured away customers with lower prices. Supervalu, which owns Albertsons, Jewel-Osco, Save-A-Lot and other grocery chains, has been working to close the price gap in order to cultivate loyalty among existing customers and attract new shoppers.
In the third quarter, for example, the company slashed prices on more than 200 items in the produce section by up to 20 percent. That immediately led to more sales, Supervalu CEO Craig Herkert said in a conference call with investors on Tuesday. The higher turnover resulting from the higher sales also meant that fruits and vegetables were fresher, which in turn improved shopper perceptions about the store, he said.
In the year ahead, Herkert said the same pricing strategy will be used as a “playbook” up and down other aisles of the supermarket, with the goal of “removing price as a barrier to shopping at our stores.”
SuperValu also plans to dramatically increase the number of products it offers under its store brands, which were bought under the “Essential Everyday” name last year. Store brands — otherwise known as house brands and private label brands — have become a critical way for supermarkets to keep costs down as rising fuel and commodity prices have made stocking shelves more expensive.
Despite the SuperValu’s ongoing efforts, investors largely seem to have lost hope in the company. Since July 2007, the company’s stock has fallen almost 90 percent from nearly $50 per share. On the news of its improved quarterly results Tuesday, Supervalu’s shares were up 56 cents at $5.88. That’s still roughly half the price it was trading about a year ago.
But the company’s turnaround plan appears to be working. SuperValu said it lost $424 million, or $2 per share, in the three months ended Feb. 25. That’s compared with a profit of $95 million, or 44 cents per share, in the year-ago period.
But excluding goodwill, charges related to layoffs and other one-time items, the Minneapolis-based company said it earned 38 cents per share. That topped the 35 cents per share expected by analysts polled by FactSet.
Supervalu said revenue was down 5 percent to $8.23 billion, above the $8.14 billion expected by Wall Street.
For the full year, the company said net income, excluding one-time items, was $265 million, or $1.25 per share.
For fiscal 2013, SuperValu said it expects to earn between $1.27 and $1.42 per share, which was higher than the $1.18 per share forecast by analysts.
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