Store brands like Wild Harvest are a key part of SUPERVALU's strategy. Image: SUPERVALU.

Turnaround stories always grab the attention of value-seeking investors, but the transformation at supermarket chain SUPERVALU (SVU) has required patience for shareholders hoping to cash in on the potential of a smaller and more-focused company. Yet coming into Tuesday morning's fiscal fourth-quarter financial report, SUPERVALU shareholders were largely pleased with the company's progress in recent years, and further good news in its latest results should keep investors happy despite the tough competitive environment in the grocery industry. Let's look at how SUPERVALU did in the quarter and what it sees ahead for the new fiscal year.

SUPERVALU stays on the growth track
SUPERVALU's results continued the company's recent upward trajectory, although it's important to consider the impact of an extra week in this year's fiscal fourth quarter compared to the previous year. Revenue of $4.36 billion was up 10.4% from last year, or 2.5% on a calendar-adjusted basis, which was slightly less than the $4.39 billion that most investors had expected. Yet after adjusting for costs related to store closures and other one-time items, SUPERVALU earned $0.24 per share during the quarter, topping the $0.21 consensus figure among those following the stock.

Digging more deeply into its business segments, SUPERVALU gave investors reason for optimism. The Save-A-Lot segment's same-store sales rose 3.6%, with corporate-owned stores securing an even-stronger comps gain of 6.6%. Overall, Save-A-Lot's revenue rose 6% after adjusting for the extra week in the fiscal quarter. The retail food segment also maintained positive comps, albeit at a slower pace of 1.1%, with overall adjusted sales growth coming in at 4.4%. Only the independent business division, which contributes the most to total revenue, was pressured, with a 7.4% sales gain coming entirely from the extra week, leading to a calendar-adjusted decline of 0.5% from the year-ago quarter.

SUPERVALU has also done a better job at keeping margins as wide as possible. Save-A-Lot's operating margin declined just a tenth of a percentage point in the fourth quarter, substantially slowing the rate of decline from earlier in the year. But incremental growth in operating margins from the retail food and independent business units helped push overall margin up a tenth of a point to 3.2%.

SUPERVALU CEO Sam Duncan. Image: SUPERVALU.

CEO Sam Duncan had good things to say about the quarter. In his words, "We finished the year with a strong quarter, highlighted by positive identical store sales at both Save-A-Lot and Retail Food." Duncan said he believes investments in all three of its business divisions should help the company grow further in the current fiscal year.

SUPERVALU needs to keep climbing higher
At the same time, SUPERVALU has hopes for further growth. Duncan noted that the quarter also marked "the transition of the first stores in our important new relationship with Haggen," a Pacific Northwest grocery chain with which SUPERVALU recently inked a supply agreement. Although Haggen has historically been a small grocery chain, with just 18 stores in Washington and Oregon, the company will grow dramatically as a result of its deal to purchase 164 stores in connection with the merger of Safeway (NYSE: SWY) and Albertson's. The Haggen purchase results from Federal Trade Commission divestiture requirements that Safeway and Albertson's had to deal with, and serving Haggen's expanded network is a substantial growth opportunity for the independent business segment.

SUPERVALU also has plenty of potential in its retail and discount chains. Competition remains fierce, but the company's streak of positive same-store sales indicates SUPERVALU is doing things right to woo customers and keep them coming back to their stores for repeat business.

Investors weren't terribly pleased with the report, with SUPERVALU shares opening down 7% in the first half-hour of the trading day after having traded in both directions in pre-market trading immediately following the announcement. In the long run, though, SUPERVALU can keep moving forward with its growth plans as long as it remains focused on taking maximum advantage of its more manageable size and stays nimble enough to grab new opportunities when they arise.