Supervalu Inc. the No. 2 U.S. grocery chain, posted a much higher quarterly profit on Thursday, driven by its acquisition of most of Albertsons Inc.'s grocery operations, but charges from the sale of a small chain led the company to miss Wall Street's expectations.Supervalu, which added several hundred Albertsons stores to its lineup in June and runs a distribution business, also raised its profit forecast for the current fiscal year. Profit was $119 million, or 57 cents per share, in its fiscal fourth quarter that ended Feb. 24, compared with a profit of $6 million, or 4 cents per share, a year earlier.

On that basis, analysts, on average, had expected Supervalu to earn 63 cents per share, according to Reuters Estimates. The company said the difference between its results and Wall Street's forecast stemmed from a
noncash charge of 11 cents per share from the sale of 18 Scott's Food & Pharmacy stores in Fort Wayne, Indiana, to Kroger Co.
Terms of the agreement were not disclosed.

Kroger, the largest traditional U.S. grocery chain, said in a separate announcement that the deal should close later this year, subject to customary closing conditions. Net sales more than doubled to $10.3 billion, topping analysts' average revenue forecast of $10.25 billion. Retail sales more than tripled to $8.15 billion, driven by Albertsons. Identical store sales rose 1.4 percent on a combined basis, and 1.8 percent at the acquired stores. PROFIT FORECAST RAISED For the current fiscal year, Supervalu said it expects to earn $2.68 to $2.87 per share, up from a prior target of $2.58 to $2.77 per share. That view includes 16 cents to 20 cents per share in one-time transaction costs. Supervalu forecast fiscal 2008 sales of about $44 billion. Analysts, on average, had expected the Minneapolis-based company to earn $2.69 per share on $44.57 billion in revenue. Identical store sales for the combined operations should rise 1 percent to 2 percent this year, Supervalu said. The company said it plans to open about 25 to 30 standard-size stores and 60 to 80 limited assortment stores, including licensed stores, this year. Supervalu also plans to do major remodeling work at about 100 to 110 stores.

The company is adding specialty items and expanding sections such as the bakery and deli as it tries to keep shoppers from flocking to high-end chains such as Whole Foods Market Inc. and discount stores such as Wal-Mart Stores Inc.

Shares of Supervalu closed at $39.94 on Wednesday after reaching a high of $40.55 a day earlier.The shares trade at about 14.9 times next year's expected earnings, while Kroger trades at about 16.2 times its expected profit for next year, according to financial data.

April 19, 2007 · Reuters

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