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Shares of Supervalu Inc. (NYSE: SVU) are trading significantly lower today following this morning's third-quarter earnings release. The company posted a pretty strong quarter, but lowered its full-year outlook.The company reported growth of 25% for its quarterly profit, which rose up to $141 million, or 66 cents per share, following weaker employee-related costs, depreciation expense, litigation charges and one-time acquisition costs. Analysts had expected the grocery store chain show earnings of 63 cents per share. For the same period last year, Supervalu had posted a profit of $113 million, or 54 cents per share.
Even with the higher profits, if you take a look at revenues, you see a decline of 4.2% in the quarter, which had one less week than the year-earlier period, and cut about $500 million from revenue. The company posted sales of $10.21 billion, beating analysts' expectations for sales of $10.17 billion.
Looking ahead, the company cut its earnings and sales forecast, anticipating a declining consumer spending. Supervalu now anticipates earnings in a range between $2.71 and $2.77 per share, compared with its prior forecast for earnings of $2.73 to $2.83. Analysts have been predicting a profit of $2.77 per share. For sales at stores open at least a year, the company also expects a growth of 0.5% to 1.0%, excluding fuel sales. Supervalu previously had predicted that sales would be up at the low end of a range of 1% to 2%.
According to Jeff Noddle, the company's Chairman and Chief Executive, Supervalu is pleased with overall results, "despite some headwind from softer than expected retail sales in the quarter."
Given that consumer spending has been a question as of late as recession fears grow, the market didn't react well to the lower forecast and the stock has tumbled over 16% today to $28.68 by 1:30 pm.
Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.
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