SUPERVALU (SVU) recently announced fourth-quarter and full-year earnings results that almost made me change my mind about my long-held bearish view on the company. Earnings came in at $26 million, a total reversal of last year's $1.4 billion loss. Net sales crept up 1.4% as well. Some minds were certainly changed, as the stock jumped almost 16% shortly after earnings were announced.

But perhaps investors were less convinced after reading the fine print. After the initial jump, the stock fell back down to earth, and is now essentially unchanged. Read on to see what could have soured such strong results.

What went right
I'd be remiss if I didn't say that SUPERVALU should be applauded for a few things. In the fourth quarter, both the Save-A-Lot and Retail Food segments showed positive same-store sales, coming in at 2.1% and 0.2%, respectively. While Retail Food's 0.2% isn't much to get excited about, it's an improvement over previous quarters, which dragged the full-year average down to negative 1.5%. 

Operating margin was also significantly improved, thanks in large part to lower selling and administrative costs, which were 220 basis points lower this year after adjusting for certain one-time expenses. Even gross margin increased by 120 basis points. All told, it seems like SUPERVALU finally turned the ship around.

The devil's in the details
But as I've noted before, these improvements come with a little asterisk and some fine print. Sure, Save-A-Lot and Retail Food showed improvement, especially in the fourth quarter. But these two segments only account for a combined 52% of net sales. The biggest segment, at 47% of sales, is the Independent Business segment, which provides wholesale distribution to independent retail food stores. That segment saw a 1.6% decrease in sales over the year, worse than last year's 0.3% decrease.

Furthermore, the cost reductions that helped boost operating profits are only half the story. Of the $437 million in increased operating profits (before certain offsets), $198 million came from something called the "Transition Services Agreement,"  or TSA. The TSA relates to last year's sale of several of SUPERVALU's major brands, such as Albertson's and Acme, with SUPERVALU collecting a consulting fee for providing certain transition services to the brands' new owners.

This is like the opposite of the dreaded "restructuring costs" companies sometimes incur, where earnings might be depressed for a few quarters while the company experiences an irregular cost such as retail store remodeling, and earnings seem to improve a year later when those costs phase out, even if the core business stayed the same. Here, SUPERVALU seems to have improved profits, when it is simply collecting a temporary fee from agreements that phase out over one to five years, with the first of them expiring this September.

On top of all that, management noted in the conference call that it plans to "invest in price and EBITDA" in order to increase sales in the year ahead -- which is a polite way of saying that the company plans to lower prices to increase sales, and management expects this to result in lower profits in the upcoming year. Ideally, this would be temporary and simply serve to bring in more customers, ultimately resulting in higher profits down the road. But it seems like a risky strategy when the company is only just now back in the black, with a narrow 0.65% profit margin, especially considering the cutthroat competition in the discount grocery business.

The Foolish bottom line
I can't deny that SUPERVALU is enacting some kind of turnaround. The steady progress toward growing same-store sales is heartening, as are the improvements to operating margin. Unfortunately, some of those margin improvements are already set to fade away as the company uses them to pay for price reductions. Whether that will bring in enough customers to bring profits back up is hard to say. Even if it does, whether it will be enough to carry the company after the TSA terms start to expire is even less certain. I continue to believe investors should be wary of this company.