Supervalu may spin off Sav-A-Lot

Supervalu Inc. said it is considering spinning off its Sav-A-Lot stores into a separate businessas the discount chain reporteda big earnings increase for the first quarter.

Net earnings soared 42% to $61 million, from $43 million in the same quarter the prior fiscal year. Cost of sales rose at a slower pace than net sales, aiding profit growth. Net sales rose 3% to $5.41 billion, from $5.26 billion.

"We delivered sales increases across all three business segments and managed our costs very well in this first quarter," said President and CEO Sam Duncan. "I'm pleased with our bottom line and ability to manage to these results in spite of softer sales at Save-A-Lot and in our Retail Food stores. We have plans in place and operationally we remain well positioned."

Supervalu is evaluating the spinoff of its Save-A-Lot hard discount chain. Save-A-Lot has more than 1,300 stores, including about 430 corporate stores and approximately 900 licensed stores.



“We believe Save-A-Lot has significant growth potential,” said Duncan. “During the last two-and-a-half years, Save-A-Lot has repositioned its brand, refocused its efforts on fresh produce and meat, and remerchandised its stores and product offerings to better appeal to a broader group of customers. We believe a separation of our Save-A-Lot business could allow Save-A-Lot, our independent business and our retail food banners to better focus on their respective operations, and pursue strategies specific to their business characteristics and growth potentials, for the benefit of our shareholders, customers, licensees and employees.”



No specific timetable for a separation has been set and a separation of Save-A-Lot is not guaranteed. Supervalu has engaged Barclays and Greenhill to serve as financial advisors, and Wachtell, Lipton, Rosen and Katz as legal advisor, in connection with this possible separation.