Supervalu to Acquire Associated Grocers of Florida

Further making good on its intent to bolster its wholesale business, Supervalu infused additional firepower into its plan by acquiring Associated Grocers of Florida, which is valued at approximately $180 million.

The deal will allow Supervalu to expand its operations into a new part of Florida and provide the Minneapolis-based company with new opportunities to bring its products and services to the Pompano Beach, Fla.-based AG’s diverse customer base in the southern part of the Sunshine State, the Caribbean and other international markets. As part of the transaction -- which comes four months after acquiring Commerce, Calif.-based Unified Grocers for $390 million -- Supervalu also inked a long-term supply agreement with AG’s' largest customer that will go into effect after the transaction closes..

"Associated Grocers represents a great opportunity for us to further expand our wholesale business into another important region," says Mark Gross, Supervalu president and CEO, adding that the the latest acquisition “is another example of how we're delivering on our growth strategy."

During its last fiscal year ended July 29, 2017, AG’s posted roughly $650 million in revenue, as estimated by Supervalu under its accounting policies.

Gross commended “Christopher Miller and his talented team [for] the outstanding work to build and support a dynamic and diverse retailer base...Once the transaction is complete, we can bring the benefits of our combined scale and expertise to their customers to help them better compete in the evolving grocery industry."

The transaction, which was approved by each company's board of directors, is currently expected to close by the end of calendar year 2017, subject to approval by Associated Grocers' shareholders and other customary closing conditions.

In other Supervalu news, the company’s net sales increased by $995 million, or 35 percent over last year’s second quarter while wholesale net sales increased by over $1 billion, or 58 percent over last year’s second quarter, including 11 weeks of Unified Grocers results that contributed approximately $790 million to net sales.

Supervalu also reported a net loss from continuing operations of $25 million, which included a $27 million after-tax asset impairment charge and $16 million of after-tax merger and integration costs. When adjusted for these items, second quarter fiscal 2018 net earnings from continuing operations were $18 million, or $0.46 per diluted share.

“We continue to make tremendous strides in driving our strategy, evidenced by another quarter of strong growth from our core wholesale business, which now represents over 70 percent of net sales,” said Gross. “Additionally, our results now include the benefit of Unified Grocers, where I'm pleased that the transition is going well. We have a lot to be excited about as we turn our focus toward the back half of our fiscal year.”

Wholesale

Supervalu’s second quarter wholesale net sales were $2.74 billion vs. $1.73 billion last year, an increase of 58 percent. The net sales increase is primarily due to sales from the acquired Unified Grocers business, sales to new customers and increased sales to new stores operated by existing customers, partially offset by stores no longer being supplied by Supervalu and lower military sales.

Wholesale operating earnings in the second quarter were $61 million, or 2.2 percent of net sales. Last year’s second quarter Wholesale operating earnings were $58 million, and included a fee received from a supply agreement termination of $9 million. When adjusted for this item, last year's second quarter wholesale operating earnings were $49 million, or 2.8 percent of net sales. The decrease in adjusted Wholesale operating earnings, as a percent of net sales, was driven by lower operating earnings, as a percent of net sales, from the acquired Unified Grocers business.

Retail

The company also saw a 1.1 percent dip in second quarter retail net sales of $1.02 billion, compared to $1.03 billion last year. The net sales decrease reflects identical store sales of negative 3.5 percent and closed stores, partially offset by sales from acquired and new stores.

Retail operating loss in the second quarter was $58 million, and included a $42 million asset impairment charge, which when adjusted, netted an operating loss of $16 million, or negative 1.5 percent of net sales.

With annual sales of approximately $16 billion, Supervalu serves customers across the United States through a network of 3,337 stores composed of 3,120 wholesale primary stores operated by customers serviced by its food distribution business and 217 traditional retail grocery stores operated under five retail banners in six geographic regions.