(By Mani) Supervalu, Inc.
) says it pans to eliminate an estimated 2,200 - 2,500 store-level positions at its Albertsons stores in Southern California and Nevada, suggesting that sales trends have not yet improved for the retailer.
The cuts, which will be announced over the week of June 17 through around July 1, will impact all 247 stores in the division. The company hopes the move will simplify the organization and reduce expenses, which it can then "reinvest in more customer facing initiatives."
The decision to make the cuts follows the company's success in finding ways to delayer/ cut costs by making reductions at the Fullerton store support center.
"SVU has been running negative non-fuel ID sales for the past 16 quarters, so the announced cuts come as no huge surprise. That said, we believe the timing—about a week before 1Q ends— suggests that sales trends may not be picking up as planned," Deutsche Bank analyst Charles Grom wrote in a note to clients.
Meanwhile, the Southern California market remains intensely competitive, with stronger players such as Kroger (NYSE:KR) better-positioned than Supervalu to address today's more value-focused consumer.
The latest cuts at Supervalu could make its transformation process more difficult. Even before the latest announcement, Supervalu's employee/store count decline at a much steeper rate than close competitors. For example, between 2006 and 2011, the company's employee/store count fell 27 percent versus 11 percent increase at Kroger.
Shares of Supervalu fell 47 percent year-to-date, while the broader S&P 500 index gained three percent.
"We remain concerned that SVU's continued store-level employee cuts could make it more difficult to effect the transformation," said Grom, who has a "hold" rating on Supervalu shares.
For the fourth quarter ended Feb.25, the Eden Prairie, Minnesota-based company reported a net loss of $424 million or $2 per share, compared to a net income of $95 million or $0.44 per share reported last year. Excluding items, the retailer earned 38 cents, which came in above consensus view of 35 cents per share.
Net sales for the quarter declined to $8.23 billion from $8.66 billion in the same quarter last year, which also came below analysts estimate of $8.31 billion. The company attributed the decline in net sales mainly to identical store sales of negative 1.9 percent.
For the fiscal 2012, the company lost $1.04 billion or $4.91 per share, narrower than a loss of $1.51 billion or $7.13 per share a year ago. Full year net earnings, adjusted for noncash goodwill and intangible asset impairment charges, came in at $265 million or $1.25 per share.
The company expects earnings per share to be in the range of $1.27 to $1.42 for fiscal 2013, while analysts currently project full-year earnings of $1.29 per share.