SUPERVALU CALLS FLEMING BANKRUPTCY 'TREMENDOUS WINDOW OF OPPORTUNITY'

David Ghitelman

MINNEAPOLIS -- Supervalu here said it is looking to pick up distribution business from customers of Fleming, Dallas, but only in markets accessible from its existing distribution centers.

During a conference call with analysts to discuss results for the fourth quarter and year ended Feb. 22, Jeff Noddle, Supervalu's chairman and chief executive officer, said, without mentioning the name of his company's principal rival, "We have a tremendous window of opportunity, and recent events have enhanced that opportunity."

Fleming filed for Chapter 11 bankruptcy protection at the beginning of this month.

Responding to questions by analysts, Noddle became more specific. "Obviously, we have an opportunity now that we might not have had as we began the year," he said, noting that Supervalu is currently in discussions with some Fleming customers. "We are working with a number of retailers that, frankly, are in need of some product. We are very aggressively making sure retailers have a good flow of product, particularly as we have an Easter holiday looming."

However, Noddle explained that Supervalu is not looking to expand the geographic scope of its distribution business. "We have said consistently that in terms of acquiring distribution business, we are trying to consolidate markets that we operate in," he said. "We are looking at opportunities that are in-market or contiguous to markets we operate in. That would be our highest priority."

He noted that Fleming's and Supervalu's distribution businesses overlap in the Southeast, Midwest and, to some extent, in the Northeast. He added that except for its Save-A-Lot chain of limited assortment stores, Supervalu does not have distribution business in the Southwest. Noddle said Supervalu overlaps with approximately 60% of Fleming's distribution business with conventional supermarkets, a business that one analyst during the call estimated at roughly $7 billion to $8 billion per year.

Supervalu said in fiscal 2004, a 53-week year, the company expects earnings per share of $2 to $2.15. Capital spending is projected to be between $425 million to $450 million, including 75 to 100 new Save-A-Lot combination limited assortment and dollar stores, eight to 12 new regional banner stores and store remodels, and the conversion of its Metro grocery store network to the Shopper's Food Warehouse format. The company anticipates same-store sales will be flat, and distribution segment revenues will decline 2% to 4%.

In the 12-week fourth quarter, Supervalu said sales rose 2.2% to $4.6 billion, same-store sales were flat, net income jumped 95.4% to $63.9 million, and earnings per share were 48 cents, vs. 24 cents in the previous year's fourth quarter.

For the 52-week year, sales declined 5.4% to $19.2 billion, same-store sales fell 1.1%, net income grew 29.6% to $257 million, and earnings per share were $1.91, vs. $1.48 in the previous year.