Save-A-Lot grows sales, not profits

A strong 6.9 percent identical store sales increase at Supervalu’s Save-A-Lot stores proved a drain on parent company profits in the third quarter.



During the period ended November 29, Supervalu said its total sales increased 4.8 percent to $4.2 billion while net income from continuing operations declined to $12 million, or four cents a share, from $33 million, or 12 cents a share, the prior year. Excluding $36 million in non-recurring charges from the most recent quarter, the company said its adjusted profit from continuing operations was $49 million, or 18 cents a share.



“We passed an important milestone this quarter delivering positive sales increases in all three of our business segments for the first time in many years,” said President and CEO Sam Duncan. “I’m very encouraged to see our Independent Business segment post higher sales compared to last year’s third quarter, and I remain pleased with the continued progress we are making in our retail stores. Save-A-Lot had another good quarter from a sales perspective while also delivering a higher operating margin compared to the second quarter. Overall, the third quarter provided many positives for us to build on during the final quarter of our fiscal year.”



Among those positives was a 6.9 percent increase in identical store sales – a figure which includes locations operating for four full quarters as well as expanded locations – at the company’s small format Save-A-Lot stores. The company did not elaborate on whether the comp growth at the 1,333 unit division was driven by increased traffic, transaction size or both. Comp growth was strongest at corporate owned Save-A-Lot stores, which average about 15,000-sq.-ft., advancing 8.5 percent.



The top line growth did not translate to profit as Save-A-Lot’s operating profit declined to $34 million, or 3.2 percent of sales, compared to $40 million, or 4.1 percent of sales, the prior year, due to increase advertising, employee and occupancy costs.



Supervalu’s largest division, its Independent Business focused on providing traditional grocery wholesaling services to 1,832 stores, performed the best. Sales increased to $1.96 billion from $1.91 billion and operating profits grew to $60 million from $53 million. The company’s Retail Food division, which includes 195 traditional supermarket locations, grew sales slightly to $1.12 billion thanks to a 2.3 percent increase in identical store sales. Operating profits increased to $28 million from $25 million.