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SUPERVALU Reports Third Quarter Fiscal 2018 Results
Minnesota Ag Connection - 01/12/2018

SUPERVALU INC. reported third quarter fiscal 2018 consolidated net sales of $3.94 billion and net earnings from continuing operations of $18 million, or $0.46 per diluted share, which included $4 million of after-tax merger and integration costs and $1 million of after-tax store closure charges and costs. When adjusted for these items, third quarter fiscal 2018 net earnings from continuing operations were $23 million, or $0.61 per diluted share, which included a discrete tax benefit that contributed approximately $0.30 to net earnings from continuing operations per diluted share.

Net loss from continuing operations for last year's third quarter was $11 million, which included $25 million of net after-tax charges and costs 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 $0.35 per diluted share. See tables 1-7 for a reconciliation of GAAP to non-GAAP (adjusted) results appearing in this release.

"We're pleased to have completed our acquisition of AG Florida early in the fourth quarter," said President and CEO Mark Gross. "The work done in the third quarter concluded with this deal which, combined with the acquisition of Unified Grocers earlier this fiscal year, demonstrates our commitment to the strategic growth of our Wholesale business. Furthermore, we're extremely pleased with the integration work at Unified and the progress made in that market."

"In addition to these recent acquisitions, we continue to achieve strong underlying growth in our Wholesale business," Gross continued. "With the influx of significant new business in certain distribution centers, we experienced a larger-than-anticipated increase in expenses, but we're encouraged by the work we are doing to address those costs and believe they are manageable going forward. We remain committed to investing in our Wholesale business to drive future growth."

Supervalu expects the newly enacted federal tax legislation to reduce future cash taxes, although it is still evaluating the favorable impact.

Third quarter Wholesale net sales were $2.89 billion, compared to $1.91 billion last year, an increase of 52 percent. The net sales increase is primarily due to sales from the acquired Unified Grocers business, sales to new customers and increased sales to new stores operated by existing customers, partially offset by stores no longer operated by customers and lower military sales.

Wholesale operating earnings in the third quarter were $46 million and included $2 million of merger and integration costs. When adjusted for this item, third quarter Wholesale operating earnings were $48 million, or 1.7 percent of net sales. Last year's third quarter Wholesale operating earnings were $52 million, or 2.7 percent of net sales. The decrease in adjusted Wholesale operating earnings, as a percent of net sales, was driven by the mix impact of the acquired Unified Grocers business contributing to operating earnings at a lower percent of net sales and higher trucking and logistics costs.

Third quarter Retail net sales were $1.02 billion, compared to $1.06 billion last year, a decrease of 4.1 percent. The net sales decrease reflects identical store sales of negative 3.5 percent and closed stores, partially offset by new and acquired store sales.

Retail operating loss in the third quarter was $6 million and included $3 million in store closure charges and costs. When adjusted for this item, Retail operating loss in the third quarter was $3 million. Last year's third quarter Retail operating loss was $14 million and included a $15 million goodwill impairment charge and $1 million of store closure charges and costs. When adjusted for these items, last year's third quarter Retail operating earnings were $2 million, or 0.2 percent of net sales. The decrease in adjusted Retail operating earnings was driven by the impact of lower gross margins from lower net sales.

Supervalu currently expects net earnings from continuing operations to be in the range of $(20) million to $2 million which includes a non-cash charge of $35 million to $45 million anticipated to be made in the fourth quarter to reduce the carrying value of Supervalu's net deferred tax asset in accordance with the newly enacted tax reform legislation.

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