Wholesale drives SuperValu’s top line
As discussed, SuperValu (SVU) reported its 4Q17 results on April 25. The company returned to growth after several quarters of sales decline.
The company’s wholesale segment was the key driver of its 1Q17 top line. Sales from this segment stood at $1.8 billion, up 3% YoY (year-over-year). Revenue growth was a result of new contracts and an increase in business with existing customers.
The company also announced the acquisition of Unified Grocers, a West Coast-based wholesale grocery distributor. The deal is expected to close by mid-to-late summer 2017.
“I’m very excited about our agreement to acquire Unified Grocers as it brings together two great companies to create one of the nation’s leading grocery wholesale organizations,” said SuperValu president and CEO Mark Gross.
Retail sales continue to fall
Retail sales continued to slide and fell 3.2% YoY to $1.1 billion in 4Q17. Same-store sales remained negative at -5.8%, making it the eighth consecutive quarter of decline.
Traffic at the stores was down 4.3%, while the average basket size fell by 1.5%. Ongoing deflation, increasing competition, and lower SNAP (Supplemental Nutrition Assistance Program) benefits were cited as key reasons for the poor performance.
In the company’s 4Q17 earnings call, Gross stated that “we continue to feel the impact of competitive new store openings against over half of our Retail stores, and we have yet to cycle the decline in SNAP benefits that started in last year’s first quarter.”
Investors seeking to add exposure to SuperValu could consider the iShares S&P Small-Cap 600 Value ETF (IJS), which invests 0.3% of its portfolio in the company. Continue to the next part for a look at the company’s margins and profitability in 4Q17.