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Supervalu CFO to leave; 1Q results disappoint

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MINNEAPOLIS — On the same day it reported plunging first-quarter sales and earnings, Supervalu Inc. announced that chief financial officer Pam Knous plans to leave the company.

On the same day it reported plunging first-quarter sales and earnings, Supervalu Inc. announced that chief financial officer Pam Knous plans to leave the company.

The supermarket retailer and wholesaler said Tuesday that Knous, who also holds the title of executive vice president, has decided to depart "to pursue other career interests." Plans call for her to step down from the CFO role as of July 30 and then to remain available to assist in the transition of her responsibilities to her successor.

Supervalu said it has retained a search firm and expects to fill the CFO post by the time it reports second-quarter results in October. Sherry Smith, currently senior vice president of finance, will serve as interim CFO.

"I would like to express my thanks to Pam for her many years of service to Supervalu," president and chief executive officer Craig Herkert said in a statement. "Pam has been a major factor in the company’s growth and development for more than a decade. She is leaving the company with strong financial controls and the flexibility for us to pursue our long-term growth objectives."

Knous has served as Supervalu’s CFO since joining the company in 1997. Before that, she was executive vice president, CFO and treasurer of The Vons Cos., which is now part of Safeway Inc. Prior to joining Vons in 1991, Knous was a partner in the Los Angeles office of accounting firm KPMG Peat Marwick.

"I have greatly enjoyed my time at Supervalu, and I feel privileged to have helped transform our company from a predominantly supply chain enterprise to a major supermarket retailer," Knous commented. "After serving the company for nearly 13 years, and supporting Craig as he became oriented in the early months of his tenure, we mutually agreed that now was an appropriate time for me to move on to a new chapter in my career. I am confident in Craig’s vision and leadership and wish him and his team well as they position the company for future success."

Also on Tuesday, Supervalu reported a 9.2% decrease in net revenue and a 40.7% drop in net earnings for its fiscal 2011 first quarter.

Total sales for the 16 weeks ended June 19 were $11.5 billion, down from $12.7 billion a year earlier. Retail food sales in the 2011 quarter fell 9.6% to $9 billion, primarily reflecting the impact of a 7.2% decline in identical-store sales and previously announced market exits, according to Supervalu. Excluding Shaw’s, which was impacted by a labor dispute during the quarter, identical-store sales were down 6.5%, the company said, explaining that the identical-store performance stemmed mainly from a challenging economic environment and heightened competitive activity.

Supply chain services sales in the 2011 first quarter declined 7.9% to $2.6 billion, primarily reflecting Target Corp.’s transition to self-distribution, Supervalu reported.

On the earnings front in the 2011 first quarter, Supervalu recorded net income of $67 million, or 31 cents per diluted share. When adjusted for $25 million in net after-tax charges, or 12 cents per diluted share, primarily related to retail market exits in Connecticut and Cincinnati and the impact of the labor dispute at Shaw’s, first-quarter net earnings were $92 million, or 43 cents per diluted share, the company said.

The average analyst estimate for the quarter was for earnings of 42 cents per share, with the forecast ranging from a low of 33 cents per share to a high of 52 cents per share, according to Thomson Financial.

In the first quarter of fiscal 2010, Supervalu had net earnings of $113 million, or 53 cents per diluted share, including after-tax costs related to store closures of $3 million, or 2 cents per diluted share.

"While we are putting in place the right programs to best serve our customers, we are disappointed with our first quarter sales performance," Herkert stated. "We continue to control our margins well and take costs out of the business and are pleased to reaffirm our full-year earnings guidance before one-time items."

Supervalu forecasts fiscal 2011 net earnings on a GAAP basis to be in the range of $1.61 to $1.81 per share, with the projection on a non-GAAP basis remaining at $1.75 to $1.95. Identical-store sales, excluding fuel, are expected to decrease 5% for the year. The average analyst estimate for full-year earnings is $1.73 per share, Thomson Financial reported.

Retail square footage in the 2011 first quarter declined 6.1% versus a year ago, Supervalu added. Excluding the impact of market exits and store closures, total retail square footage edged up 0.8%, the company said.