Supervalu Profit Rises, Considering Save-A-Lot Spin-Off; Shares Up 17%

(RTTNews) - Supervalu, Inc. (SVU) Tuesday reported an increase in profit for the first quarter, as revenues increased and margins improved, with both earnings and revenues trumping estimates.

Shares of the grocery retailer surged about 17 percent after the announcement it is considering an option to spin-off its Save-A-Lot business.

Supervalu is exploring its option to spin-off Save-A-Lot business into a separate company, as it will help the retailer to focus more on its other business. The company said it has not set any specific timetable for a separation and there can be no assurance that a deal will be completed.

CEO Sam Duncan said, "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."

Save-A-Lot, which generates about 26 percent of totals sales, has over 1,300 stores, including about 430 company-owned stores and about 900 stores operated by licensee owners.

Eden Prairie, Minnesota-based Supervalu's first-quarter profit rose to $61 million or $0.23 per share from $43 million or $0.17 per share a year ago. On average, 13 analysts polled by Thomson Reuters expected earnings of $0.20 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the quarter grew 2.7 percent to $5.41 billion from $5.26 billion a year ago. Wall Street analysts had a consensus revenue estimate of $5.39 billion for the quarter.

Sales increased across all operating segments, with retail food segment sales up 3.0 percent to $1.47 billion, while Save-A-Lot unit rose 3.8 percent to $1.41 billion and independent business sales inched up 1.7 percent to $2.46 billion.

Gross margin for the quarter improved to 15.0 percent from 14.4 percent last year. Selling and administrative expenses increased to $652 million from last year's $620 million.

SVU is currently trading at $8.60, up $0.1.24 or 16.85%, on the NYSE.