Supervalu Expanding Distribution Unit as Retail Sales Fall

By Cara Lombardo Features Dow Jones Newswires

Supervalu Inc. said Wednesday that it will buy Associated Grocers of Florida for $180 million as it continues to bulk up its distribution operations to offset sagging sales at its retail stores.

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Supervalu's purchase of Associated Grocers, which includes debt, allow it to pick up a grocery cooperative that sells products to independent retailers in the U.S., but also in the Caribbean, Central and South America, and Asia. In its fiscal year ended July 29, Associated Grocers posted revenue of about $650 million, according to an estimate from Supervalu.

The two companies expect the deal to close by the end of the year, subject to approval by Associated Grocers's shareholders.

The deal comes as Minnesota-based Supervalu continued to show weakness in its retail business. The company posted a net loss in its second fiscal quarter of $25 million, compared with a profit of $31 million a year ago.

The latest quarter included a $27 million impairment charge on its retail business. It also recorded $16 million in merger and integration expenses following the recent acquisition of distributor Unified Grocers.

Adjusted earnings were 46 cents a share, which met expectations from analysts.

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Net sales in Supervalu's retail locations slid 1.1% to $1 billion as comparable sales retreated 3.5%. The company has shrunk its network of stores from about 1,500 in 2012 to around 200.

Supervalu shares, down 41% this year, rose 3.2% premarket Wednesday on low volume.

Write to Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

October 18, 2017 08:02 ET (12:02 GMT)