Supervalu reported third quarter fiscal 2017 consolidated net sales of $3.00 billion and a net loss from continuing operations of $11 million, or $0.04 per diluted share, which included $25 million of after-tax non-cash charges comprised of a pension settlement charge, a goodwill impairment charge and store closure charges and costs, partially offset by a deferred income tax benefit. When adjusted for these items, third quarter fiscal 2017 net earnings from continuing operations were $14 million, or $0.05 per diluted share.
Net earnings from continuing operations for last year’s third quarter were $16 million, or $0.05 per diluted share, which included $6 million in after-tax costs related to asset impairment charges, employee severance and store closure charges and costs. When adjusted for these items, third quarter fiscal 2016 net earnings from continuing operations were $22 million, or $0.08 per diluted share.
“The successful sale of Save-A-Lot early in the fourth quarter provides SUPERVALU with additional flexibility to operate and grow our business,” said President and CEO Mark Gross. “Additionally, our Wholesale team has done a tremendous job delivering for our customers. It is a significant accomplishment that we increased Wholesale sales compared to last year given the sales lost at the end of fiscal 2016. Unfortunately, in our Retail segment we have not been able to overcome persistent deflation, competitive impacts, and other factors. It takes time to change customers’ shopping habits, but our team is dedicated to improving our results.”
Chief Operating Officer and CFO Bruce Besanko added, “Early in the fourth quarter we used the majority of the proceeds from the sale of Save-A-Lot to reduce our outstanding debt by approximately $1.1 billion. We have also taken steps to reduce our pension plan obligations through a successful lump-sum buyout of certain plan participants that resulted in the pension settlement charge this quarter. In addition, we made a $25 million cash contribution to the pension plan.”
Besanko ended by saying, “Given the many moving parts from the sale of Save-A-Lot, we are managing the business for the next several quarters by reference to pro forma adjusted EBITDA. For the third quarter, pro forma adjusted EBITDA was $114 million, $18 million less than last year’s third quarter, reflecting the challenging operating environment across the grocery industry.”
Third quarter net sales were $3.00 billion compared to $3.05 billion last year, a decrease of $42 million or 1.4 percent. Total net sales within the Wholesale segment increased 0.2 percent. Retail identical store sales were negative 5.7 percent. Fees earned under transition services agreements (“TSAs”) in the third quarter were $37 million compared to $46 million last year.
Gross profit for the third quarter was $407 million, or 13.6 percent of net sales. Last year’s third quarter gross profit was $436 million, or 14.3 percent of net sales. The gross profit rate decrease compared to last year is primarily due to lower TSA fees and higher employee costs.
Third quarter Wholesale net sales were $1.91 billion, compared to $1.90 billion last year, an increase of 0.2 percent. The net sales increase is primarily due to sales to new customers and increased sales to new stores operated by existing customers, partially offset by stores from the prior year no longer supplied by the Company.
Third quarter Retail net sales were $1.06 billion, compared to $1.10 billion last year, a decrease of 3.4 percent. The net sales decrease reflects identical store sales of negative 5.7 percent and closed stores, partially offset by sales from acquired and new stores.