Supervalu’s Gross Margin Fell More in 3Q18


Jan. 12 2018, Updated 3:21 p.m. ET

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.

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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.

Kroger (KR) and Sprouts Farmers Market (SFM) recorded last 12-month gross margins of 22.1% and 28.9%, while United Natural Foods (UNFI) and Sysco’s (SYY) margins stood at 15.3% and 19%, respectively.

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.


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