First, a look at the results. Since detailing yearly comparisons at this point is moot, let's focus on a few highlights. For the quarter, the company earned $113 million, or $0.54 per diluted share, on $10.7 billion in sales. Consolidated comparable same-store sales were up 60 basis points, helped by the Albertson's store base. There are one-time transactions related to the Albertson's acquisition that, when backed out, would raise earnings, but let's get real -- SUPERVALU has been taking restructuring charges since 2000. It's one of those recurring non-recurring situations. I recommend leaving it in.
Another recurring theme is lots of capital expenditures. Management announced it plans to spend $1.2 billion in capital outlays for fiscal 2008, which is up from fiscal 2007's estimated $1 billion budget (when including Albertson's spending before being acquired). The increased spending will undoubtedly help the company remain competitive against other major grocery chains like Kroger
Much like Kroger, SUPERVALU (with or without Albertson's) is an X company at best. SUPERVALU's current $16.4 billion enterprise value confirms this. Using ballpark figures until the next 10-K comes out, I calculate SUPERVALU's invested capital north of $17 billion, including goodwill and capitalized operating leases. Because the market is valuing SUPERVALU at or below its invested capital, I think it's safe to bet that the market doesn't expect any economic profits moving forward.
Or, as Fool contributor Stephen Simpson succinctly put it back in April:
"Let's see whether this makes sense. Take a management team that apparently hasn't ever produced a return on capital in excess of the cost of that capital, and give them even more assets. Good plan, huh?"
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