When discount grocer SUPERVALU
In September, the company announced plans to sell 20 of its Pittsburgh-area stores, with the buyers being, for the most part, existing independent operators of the Shop 'n Save locations to be sold. The company will record non-cash losses on the sales, reducing SUPERVALU's fiscal 2006 earnings projections to a range between $1.88 and $1.98 per diluted share. That projection, which was included in the firm's October earnings release, represents a slight pullback from the $1.90 to $2.04 range it set when making the sale announcement just a month before. It accounts for a total of $0.41 per share in non-cash charges for start-up costs, losses associated with Hurricane Katrina, and losses on the sale of the 20 Pittsburgh stores. In all, these charges will wipe out the bulk of the $0.47 per share -- also non-cash -- profit that SUPERVALU recorded last year from the sale of its interest in WinCo Foods.
Of course, none of these non-cash charges plays into analysts' expectations for the firm's performance on tomorrow's earnings report, or for the fiscal year as a whole. Analysts expect the firm to record $2.25 per share "pro forma" for the year, and $0.50 per share "pro forma" for fiscal Q3 2006. That quarterly pro forma number, by the way, would fall 12% below the firm's performance of one year ago.
Also not included in analyst estimates, I suspect, are the costs the firm probably incurred in performing due diligence in preparation for a joint bid (with Cerberus Capital and Kimco Realty
Thus, it seems that SUPERVALU will be ending this year as a slimmer operation after the Pittsburgh sales. For shareholders, I suspect that's a good thing. Although the company boasts lower gross margins than competitors such as Kroger
For a contrasting Take on SUPERVALU, read:
Fool contributor Rich Smith has no position in either of the companies mentioned in this article.