Supervalu reported first quarter fiscal 2016 net sales of $5.41 billion and net earnings from continuing operations of $63 million ($0.23 per diluted share), which included $2 million in after-tax structural and tax planning fees.
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When adjusted for this item, first quarter fiscal 2016 net earnings from continuing operations were $65 million ($0.23 per diluted share).
Net earnings from continuing operations for last year’s first quarter were $48 million ($0.18 per diluted share), which included $2 million in after-tax net charges and costs for employee severance and debt financing activities. When adjusted for these items, first quarter fiscal 2015 net earnings from continuing operations were $50 million ($0.18 per diluted share).
First quarter net sales were $5.41 billion compared to $5.26 billion last year, an increase of $143 million or 2.7 percent. Save-A-Lot network identical store sales were positive 0.6 percent. Identical store sales for corporate stores within the Save-A-Lot network were positive 2.8 percent. Retail Food segment identical store sales were negative 0.3 percent.
Total sales within the Independent Business segment increased 1.7 percent. Fees earned under transition services agreements (TSAs) in the first quarter were $64 million compared to $58 million last year.
Gross profit for the first quarter was $810 million, or 15.0 percent of net sales. Last year’s first quarter gross profit was $755 million, or 14.4 percent of net sales. The increase in gross profit rate compared to last year was primarily driven by higher base margins across all three segments.
Selling and administrative expenses in the first quarter were $652 million and included $3 million of structural and tax planning fees. When adjusted for this item, selling and administrative costs were $649 million, or 12 percent of net sales. Selling and administrative expenses in last year’s first quarter were $620 million and included $1 million in employee severance costs.
When adjusted for this item, last year's selling and administrative expenses were $619 million, or 11.8 percent of net sales. The increase in adjusted selling and administrative expenses was primarily attributable to higher employee related costs driven by new store growth in Save-A-Lot and Retail Food.
Net interest expense for the first quarter was $59 million. Net interest expense for last year’s first quarter was $64 million and included $2 million in debt refinancing costs. Excluding these costs, last year's net interest expense was $62 million.
Supervalu’s income tax expense was $38 million, or 36.9 percent of pre-tax earnings, for the first quarter, compared to $24 million, or 33.1 percent of pre-tax earnings in last year’s first quarter. The tax rate for each of the first quarters of fiscal 2015 and 2016 reflect discrete tax benefits.
Supervalu announced that it is exploring a separation of its Save-A-Lot business, and that as part of that process it has begun preparations to allow for a possible spin-off of Save-A-Lot into a stand-alone, publicly traded company.
“Save-A-Lot is a leading national hard discount retailer with over 1,300 total stores, comprised of approximately 430 corporate stores and approximately 900 stores operated by licensee owners, and we believe Save-A-Lot has significant growth potential.
"Over 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,†said President and CEO Sam Duncan.
“Today’s announcement reflects our commitment to continuing to explore ways to maximize value for our shareholders. 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.â€
No specific timetable for a separation has been set. ■