Supervalu selling Utah-based Alberstons stores to Associated Food Stores

Eden Prairie, Minn. Supervalu announced Tuesday that it reached an agreement with Associated Food Stores for the sale of the majority of its Utah-based Albertsons stores. The sale will include 36 Albertsons stores in Utah. Three stores in the St. George area of the state will remain Albertsons and continue to be operated by Supervalu.

Associated Food Stores intends to rename the 36 purchased stores, and expects to interview and offer employment to most Albertsons associates. Supervalu’s Salt Lake City distribution center will remain part of Supervalu and will remain open to serve Albertsons stores in Idaho, Wyoming and Montana.

The transaction, which is subject to regulatory approval, is expected to close this fall. Supervalu will realize approximately $150 million in after-tax net proceeds from the sale.

“While this was a difficult decision due to the impact on our associates and the Utah community, the sale of these stores will allow the company to focus on our greatest growth opportunities while at the same time monetize non-strategic assets for debt paydown,” said Craig Herkert, Supervalu’s CEO.

In other news, Supervalu reported Tuesday that its fiscal first-quarter profit dropped 30% on softer sales, lowered prices and increased promotional spending. Adjusted results still topped Wall Street expectations.

The company earned $113 million for the period ended June 20, down from $162 million in the year-ago period.

"Our first-quarter results reflected the continuing difficult economic environment as well as investments we are making in price and higher levels of promotional spending," Herkert said in a statement.

Sales slid 5% to $12.72 billion. Retail food sales slipped 4.3% to $9.9 billion on store closings and a same-store sales decline of 3.2%.

First quarter capital spending was $238 million, compared with $396 million last year. During the quarter, the company completed 17 major remodels, two minor remodels, and one new traditional store.