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Lost Customers Cost Supervalu’s Wholesale Segment Sales in 1Q17

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Revisiting Supervalu’s top-line performance in fiscal 4Q16

Supervalu (SVU) reported a 3.9% YoY (year-over-year) decline in its top line to $5.2 billion in 1Q17. The decline in total sales was driven by a poor showing from the wholesale and retail businesses, which washed away the growth in the Save-A-Lot segment.

In Parts 5 and 6 of this series, we’ll focus on the performance of the retail and Save-A-Lot businesses.

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About SVU’s Wholesale or Independent business segment

The Independent Business segment is Supervalu’s largest segment in terms of revenue generation. The segment contributed 44.3% to the company’s top line in fiscal 1Q17. However, its contribution has declined from about 48% in fiscal 2013.

The segment derives revenue by providing wholesale distribution of various food and non-food products to independent retailers in the United States. The company’s independent retail customers include single and multiple grocery store operators, regional chains, and the military.

Performance of the Independent Business segment in fiscal 1Q17

Revenue from the Wholesale segment slid 7.6% YoY to $2.3 billion in fiscal 1Q17 since the segment lost business to Albertsons stores in the southeast, Haggen Food & Pharmacy stores in the Pacific Northwest, and Gordy’s in the Midwest.

The segment’s top-line performance has been inferior to most of its wholesale segment peers such as United Natural Foods (UNFI), Sysco (SYY), and Costco (COST). UNFI, SYY, and COST registered top-line growths of 0.8%, 2.1%, and 2.6%, respectively, in their last reported fiscal quarters.

However, SVU is working to replace this lost volume and claims to be moving along the right path. In the next part of this series, we’ll see where the company currently stands in terms of its initiatives.

If you want exposure to SVU without the risk, you can consider the iShares Morningstar Small-Cap Value ETF (JKL), which invests 0.24% of its portfolio in the company.

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