SuperValu Returns to Growth in 4Q17

SuperValu’s (SVU) fourth-quarter sales rose 0.6% YoY (year-over-year) to $2.9 billion, beating the consensus estimate by $10 million. The company has missed Wall Street’s top-line estimates for the last six consecutive quarters. Its top line returned to growth after falling for five straight quarters.

In 4Q17, sales growth was driven by a 3% rise in the company’s wholesale business, which accounted for ~62% of the company’s total sales during the quarter. “We finished fiscal 2017 with momentum in our Wholesale business and an improved balance sheet resulting from the sale of Save-A-Lot,” said SuperValu president and CEO Mark Gross. The company sold its grocery chain Save-A-lot to Onex for $1.4 billion in October 2016.

Retail sales, however, continued to remain muted and fell for the seventh straight quarter. Retail’s same-store sales stood at -5.8%. Read more about the performance of both businesses in the next section.

In fiscal 2017, SuperValu’s total sales, after treating Save-A-Lot as discontinued operations, fell 3.3% to $12.5 billion. While the retail segment’s sales were down 3.6%, wholesale sales fell 2.9% during the year.

Kroger (KR), America’s largest supermarket, reported a 5.5% YoY increase in total quarterly sales to $27.6 billion. The company did better than Wall Street expected and beat management’s guidance.

Organic retailer Whole Foods Market (WFM), however, fell short of consensus estimates once again. Its total sales rose 1.9% to $4.9 billion.

Wholesaler United Natural Foods (UNFI) also fell short of top-line estimates in its last reported quarter. The company’s sales rose 9.6% YoY to $2.3 billion. Investors seeking to add exposure to SuperValu could consider the iShares Morningstar Small-Cap Value ETF (JKL), which invests 0.2% of its portfolio in the company.