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Supervalu reports lower revenue in second quarter

Updated: November 20, 2012 10:51AM

Grocery owner Supervalu Inc., using its Jewel-Osco stores as a laboratory for improvement, reported a quarterly loss of $111 million Thursday and said it continues to review offers for all or parts of the company.

Chairman Wayne Sales said a revamp of Jewel’s strategy in the Chicago area is complete and that he is pleased with initial results. The company has trimmed overhead costs at Jewel and lowered prices to recover business lost to no-frills discounters and mega-retailers such as Walmart.

Sales said the effort is paying off in better “customer perceptions” about Jewel. But he said it has yet to translate to the bottom line. He also extended a timetable for repositioning half of the company’s 4,400 stores nationally, which Supervalu previously wanted to finish by the end of its fiscal 2013.

The Jewel operation covers more than 170 stores in the Chicago area and is regarded as one of the company’s stronger pieces. Supervalu also owns such chains as Albertsons and Cub Foods, and a company priority is building up its Save-A-Lot discount division.

Potential buyers for all or parts of Supervalu include billionaire Ron Burkle and buyout firm KKR & Co. Bloomberg News reported that Cerberus Capital Management LP also is interested and that Spartan Stores Inc., a Grand Rapids, Mich.-based company, has inquired about stores in the Midwest.

Supervalu would say only that it is in “active dialogue with several parties.”

For its second quarter ending Sept. 8, Supervalu said it would have broken even except for $111 million in costs, 52 cents a share, mostly for store closings. A year ago, the second-quarter profit was $60 million, or 28 cents a share. Revenue declined 4.7 percent to $8 billion.

While the results were worse than most analysts expected, the prospect of a sale caused the company’s battered shares to rise in Thursday’s trading. They’ve lost 75 percent of their value this year, but Thursday they gained 10 centers, or 4.9 percent, to close at $2.14.

Supervalu attributed the declining sales to “the stressed consumer, the competitive environment and continued investment in achieving competitive pricing.”

Regarding Jewel, Sales told analysts on a conference call, “The gross profit dollars have not started to improve. It’s too early in that process.”

But he said the repositioning has given Jewel a “halo effect” in customer attitudes and that the company is applying at its other stores lessons it has learned from the process.

It plans to close 60 stores around the country.

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