Supervalu beat earnings expectations in 3Q18
Supervalu (SVU) reported its 3Q18 results on January 10, 2018. It reported an adjusted EPS (earnings per share) of $0.61. However, its earnings included a tax benefit of $0.30 per share. Excluding this discrete item, the EPS was $0.31 and missed the consensus forecast of $0.46.
Gross margin fell
Supervalu’s gross profit improved marginally to $411 million during 3Q18. However, the gross margin fell by more than 300 basis points to 10.5% of sales. The decline was driven by a change in the sales mix and the inclusion of Unified Grocers into the company’s business.
Wholesale, which usually carries lower margins, represented 73% of the total sales in 3Q18—compared to 63% of the sales in 3Q17. While the inclusion of Unified Grocers boosted Supervalu’s top line, it lowered the company’s margins. Unified Grocers had a lower gross profit rate compared to Supervalu’s legacy wholesale business.
Supervalu’s low margins
Supervalu’s trailing 12-month gross margin stands at 12.6% of sales. It’s among the lowest in the wholesaling-retailing peer group.
ETF investors seeking to add exposure to Supervalu can consider the SPDR S&P Retail ETF (XRT), which invests 1.05% of its portfolio in the company.
Next, we’ll discuss Supervalu’s stock market performance and valuations.