SUPERVALU POSTS RECORD NET FOR YEAR

ELLIOT ZWIEBACH

MINNEAPOLIS -- Supervalu here said last week it will spend $515 million in fiscal 2000 on new stores, distribution improvements and information technology -- a boost of 0.6% from last year's expenditures of $512 million.

The company also announced record sales and earnings for the year and fourth quarter ended Feb. 27, excluding an extra week in the prior fiscal year.

The company said its spending plans for the current fiscal year will break down as follows:

Expenditures in the retail division of $302 million, encompassing 40 new Save-A-Lot limited assortment stores; 15 new price superstores, which could include units of Cub Foods, Shop 'N Save or bigg's (the company declined to pinpoint which ones); seven Shop 'n Save stores in Pittsburgh that are being acquired this month, and 14 major remodels.

A year ago the company said it spent $196 million on new stores, including three Shop 'N Saves, three Cubs and 19 Save-A-Lot units, plus $166 million to acquire 48 stores. It also said it closed or sold 19 Save-A-Lots and planned to resell 11 of the 48 acquired units.

Expenditures in the food distribution division of $148 million -- mainly to complete a 579,000-square-foot fast-moving distribution center in Hopkins, Minn. -- compared with $126 million a year ago to begin construction on the facility. The company said the Hopkins center is ahead of schedule and is likely to open before fall.

Expenditures of $65 million for other corporate purposes, primarily information technology-related projects, compared with expenses a year ago of $24 million for other purposes.

Jonathan Ziegler, a San Francisco-based securities analyst with Salomon Smith Barney, New York, said Supervalu is looking for acquisitions in an effort to grow its retail segment. "It has consolidated its retail division from a holding company to an operating format so it can do more central buying, merchandising and real-estate transactions.

"With more centralization, the company believes it can take $4 million in costs out of the system and do a better job sharing best practices among its various operations."

Supervalu said sales for the year rose 3.1% to $17.4 billion week; without the adjustment, sales were up 1.3% for the year. Net income for the year rose 11.4% to $191.3 million, excluding the extra week and a gain of $54 million from the sale of its investment in Shopko Stores, Green Bay, Wis., in the prior year, and fell 17.1% when the extra week and the gain is included.

For the 12-week fourth quarter sales increased 5.1% to $4.2 billion after adjusting for the extra week; without the adjustment sales were down 2.3%. Net income for the quarter jumped 17.6% to $54.4 million, excluding the extra week, and rose 5.3% without the adjustment.

According to Mike Wright, chairman and chief executive officer, "Our competitive position as a food distributor has never been better, and we anticipate further market-share gains."

Sales in the distributor's retail segment -- exclusive of the extra week -- rose 4.4% to $5.1 billion for the year and 9.9% to $1.4 billion for the quarter, while operating earnings were up 13.6% to $133.5 million for the year and 5.3% to $41.9 million for the quarter. Same-store sales for corporate stores rose 1.5% for the year and 1.2% for the quarter excluding the extra week.

The company said retail sales growth was driven by the addition of 73 new stores during the year, while sales increases and reductions in selling and administrative costs drove earnings.

Supervalu operates 345 corporate retail stores, including 65 units of Cub Foods, 45 Shop 'n Save, 142 Save-A-Lot, 10 bigg's, 22 Scott's Foods, 19 Laneco, five Hornbachers and 27 other assorted banners.

Sales in the company's food distribution segment increased 1.4% to $15.3 billion for the year and 4.9% to $3.6 billion for the quarter, while operating earnings fell 0.6% to $315.2 million for the year and 4.3% to $79.7 million for the quarter, despite the extra week, the company said.

Supervalu said food distribution sales benefited from the strength of the company's corporate stores as well as market-share gains in the full-service distribution and limited-assortment businesses stemming from the addition of new customers and additional stores, while operating earnings in distribution benefited from sales gains and tight controls on costs.

4TH QUARTER RESULTS

Qtr Ended 2/27/99 2/28/98

Sales* $4.2 billion $4.3 billion

Change -2.3%

Net Income* $54.4 million $51.6 million

Change 5.3%

Inc/share 45 cents 43 cents

52 Weeks 1999 1998

Sales* $17.4 billion $17.2 billion

Change 1.3%

Net Income* $191.3 million $230.8 million**

Change -17.1%

Inc/Share $1.59 $1.84

*Results compare 52 weeks in fiscal 1999 with 53 weeks in the prior year and a 12-week fourth quarter in 1999 with a 13-week fourth quarter the prior year.

**Net income in 1998 reflects a gain of $54 million from the sale of Supervalu's investment in Shopko Stores, Green Bay, Wis.