Supervalu Inc considers Save-A-Lot spinoff

Tuesday reported an increase in profit for the first quarter, as revenues increased and margins improved, with both earnings and revenues trumping estimates.

US retailer Supervalu surged the most in more than a year after saying it’s considering spinning off the Save-A-Lot grocery-store chain to focus more attention on its food-distribution business. Supervalu said it doesn’t have a timeline for when the Save-A-Lot separation may happen.

The company owns supermarket chains such as Fresh Farm, Cub, and Shop n’ Save.

Save-A-Lot includes 1,300 total stores, comprised of 430 corporate stores and approximately 900 stores operated by licensees.

“We believe a separation of our Save-A-Lot business could allow Save-A-Lot, our independent business and our retail food banners to better focus on their respective operations, and pursue strategies specific to their business characteristics and growth potentials, for the benefit of our shareholders, customers, licensees and employees”, said Sam Duncan, Supervalu president and CEO, in this morning’s announcement.

Supervalu has not set a timetable for a possible split. Now, SUPERVALU believes that it can do the same thing by narrowing its scope even further, and given the particular success that Save-A-Lot has had and the huge role the unit has played, the company hopes that it can persuade investors in an initial public offering or other sale to reward a separately traded Save-A-Lot with a healthier valuation. This also beat the year-ago results of 18 cents per share.

Spinning off Save-A-Lot would allow Supervalu to concentrate on wholesaling goods to other food retailers, which accounted for nearly half of its sales in its most recent fiscal year. It will open its first Las Vegas store later this summer.

SuperValu shares rose 75 cents, or 10.2 percent, to $8.11 in afternoon trading Tuesday. They rose 0.6 percent in the quarter, while analysts estimated a gain of 2.6 percent, according to Consensus Metrix.

Analysts had expected the company to report earnings of 20 cents per share on revenue of $5.39 billion.