SUPERVALU INC. (NYSE:SVU) today reported second quarter fiscal 2017 consolidated net sales of $3.87 billion and net earnings from continuing operations of $30 million, or $0.11 per diluted share, which included a net $2 million after-tax gain, comprised of a fee received from a supply agreement termination, partially offset by store closure charges and costs as well as costs related to the potential separation of Save-A-Lot. When adjusted for these items, second quarter fiscal 2017 net earnings from continuing operations were $28 million, or $0.10 per diluted share.

Net earnings from continuing operations for last year’s second quarter were $31 million, or $0.11 per diluted share, which included $6 million in after-tax costs related to the potential separation of Save-A-Lot and severance costs. When adjusted for these items, second quarter fiscal 2016 net earnings from continuing operations were $37 million, or $0.13 per diluted share. [See tables 1-6 for a reconciliation of GAAP and non-GAAP (adjusted) results appearing in this release.]

“As we expected, the transformation of our business continues to take time, but I am optimistic about our ability to grow our wholesale business by adding new customers, securing long-term supply agreements with existing customers, and expanding overall product sales to all customers,” said President and CEO Mark Gross.  “We expect wholesale sales in the second half of this year to be higher than last year as we add new customers, grow our base business, and cycle select customer losses from last year.”

Second Quarter Results – Continuing Operations

Second quarter net sales were $3.87 billion compared to $4.06 billion last year, a decrease of $197 million or 4.8 percent. Total net sales within the Wholesale segment decreased 5.5 percent. Retail identical store sales were negative 5.9 percent. Save-A-Lot network identical store sales were negative 5.2 percent. Identical store sales for corporate stores within the Save-A-Lot network were negative 5.0 percent. Fees earned under transition services agreements (“TSAs”) in the second quarter were $41 million compared to $48 million last year.

Gross profit for the second quarter was $562 million, or 14.5 percent of net sales and included net costs of $1 million related to store closures. When adjusted for this item, gross profit was $563 million, or 14.6 percent of net sales. Last year’ssecond quarter gross profit was $583 million, or 14.4 percent of net sales. The gross profit rate increase compared to last year is primarily due to higher product margin rates and new Save-A-Lot corporate stores.

Selling and administrative expenses in the second quarter were $474 million and included a fee received from a supply agreement termination of $9 million, partially offset by $3 million in costs and charges related to store closures and $1 million in costs related to the potential separation of Save-A-Lot. When adjusted for these items, selling and administrative expenses were $479 million, or 12.4 percent of net sales. Selling and administrative expenses in last year’s second quarter were$489 million and included $4 million of costs related to the potential separation of Save-A-Lot and $4 million of severance costs. When adjusted for these items, second quarter fiscal 2016 selling and administrative expenses were $481 million, or 11.9 percent of net sales. The increase in the selling and administrative expense rate compared to last year is primarily due to the deleveraging impact of lower sales and new Save-A-Lot corporate stores, partially offset by lower pension expense.

Net interest expense for the second quarter was $41 million. Last year’s second quarter interest expense was $44 million. The decrease in interest expense was driven by lower average debt balances.

Income tax expense was $18 million, or 36.2 percent of pre-tax earnings, for the second quarter, compared to an income tax expense of $19 million, or 40.0 percent of pre-tax earnings, in last year’s second quarter.

Wholesale

Second quarter Wholesale net sales were $1.73 billion, compared to $1.83 billion last year, a decrease of 5.5 percent. The net sales decrease is primarily due to stores from the prior year no longer supplied by the Company, partially offset by increased sales to new stores operated by existing customers and new customers.

Wholesale operating earnings in the second quarter were $58 million, or 3.3 percent of net sales, and included a fee received from a supply agreement termination of $9 million. When adjusted for this item, Wholesale operating earnings were $49 million, or 2.8 percent of net sales, flat to last year’s Wholesale operating earnings in the second quarter which represented 2.7 percent of net sales.

Save-A-Lot

Second quarter Save-A-Lot net sales were $1.06 billion, compared to $1.09 billion last year, a decrease of 2.8 percent. The net sales decrease reflects network identical store sales of negative 5.2 percent, partially offset by new corporate and licensed stores.

Save-A-Lot operating earnings in the second quarter were $22 million, or 2.1 percent of net sales. Last year’s Save-A-Lot operating earnings in the second quarter were $32 million, or 3.0 percent of net sales. The decrease in Save-A-Lot operating earnings was driven by higher employee-related costs and increased promotional costs, partially offset by higher product margin rates.

Retail

Second quarter Retail net sales were $1.03 billion, compared to $1.09 billion last year, a decrease of 5.4 percent. The net sales decrease reflects identical store sales of negative 5.9 percent, partially offset by sales from new stores.

Retail operating loss in the second quarter was $12 million, or negative 1.2 percent of net sales and included $4 million of store closure charges and costs. When adjusted for this item, Retail operating loss was $8 million. Last year’s Retail operating earnings were $10 million, or 0.9 percent of net sales. The decrease in Retail operating earnings was driven by lower sales and higher employee-related costs due to new corporate stores.

Corporate

Second quarter fees earned under the TSAs were $41 million compared to $48 million last year.

Net Corporate operating earnings in the second quarter were $20 million and included $1 million of costs related to the potential separation of Save-A-Lot. When adjusted for this item, net Corporate operating earnings were $21 million. Last year’s second quarter net Corporate operating earnings were $3 million and included $4 million of costs related to the potential separation of Save-A-Lot and $4 million of severance costs. When adjusted for these items, last year’s net Corporate operating earnings were $11 million. The improvement in net Corporate operating earnings was primarily driven by lower pension expense and lower employee-related costs.

Cash Flows – Continuing Operations

Fiscal 2017 year-to-date net cash flows provided by operating activities of continuing operations were $275 million compared to $276 million last year. Fiscal 2017 year-to-date net cash flows used in investing activities of continuing operations were $115 million compared to $119 million last year. Fiscal 2017 year-to-date net cash flows used in financing activities of continuing operations were $163 million compared to $25 million last year, reflecting higher payments on debt obligations.

Discontinued Operations

On October 17, 2016, SUPERVALU INC. announced it had reached an agreement with Onex Corporation to sell its Save-A-Lot business. This transaction is anticipated to be completed by January 31, 2017. As a result of the agreement, the Company anticipates presenting the Save-A-Lot business being disposed as discontinued operations for all periods within future earnings releases, and Form 10-Q and 10-K filings.

Conference Call ­­­

A conference call to review the second quarter results is scheduled for 9:00 a.m. central time today. The call will be webcast live at www.supervaluinvestors.com (click on microphone icon). A replay of the call will be archived atwww.supervaluinvestors.com. To access the website replay go to the “Investors” link and click on “Presentations and Webcasts.”

About SUPERVALU INC.

SUPERVALU INC. is one of the largest grocery wholesalers and retailers in the U.S. with annual sales of approximately $18 billion. SUPERVALU serves customers across the United States through a network of 3,382 stores composed of1,815 stores operated by wholesale customers serviced primarily by the Company’s food distribution business; 1,370 Save-A-Lot stores, of which 888 are operated by licensee owners; and 197 traditional retail grocery stores (store counts as ofSeptember 10, 2016). Headquartered in Minnesota, SUPERVALU has approximately 40,000 employees. For more information about SUPERVALU visit www.supervalu.com.