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GuruFocus has detected 2 Warning Signs with SUPERVALU Inc \$SVU.
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SUPERVALU Inc (NYSE:SVU)
Gross Profit
\$2,338 Mil (TTM As of Nov. 2016)

SUPERVALU Inc's gross profit for the three months ended in Nov. 2016 was \$407 Mil. SUPERVALU Inc's gross profit for the trailing twelve months (TTM) ended in Nov. 2016 was \$2,338 Mil.

Gross Margin is calculated as gross profit divided by its revenue. SUPERVALU Inc's gross profit for the three months ended in Nov. 2016 was \$407 Mil. SUPERVALU Inc's revenue for the three months ended in Nov. 2016 was \$3,003 Mil. Therefore, SUPERVALU Inc's Gross Margin for the quarter that ended in Nov. 2016 was 13.55%.

SUPERVALU Inc had a gross margin of 13.55% for the quarter that ended in Nov. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of SUPERVALU Inc was 22.94%. The lowest was 13.42%. And the median was 21.99%.

Warning Sign:

SUPERVALU Inc gross margin has been in long term decline. The average rate of decline per year is -9%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

SUPERVALU Inc's Gross Profit for the fiscal year that ended in Feb. 2016 is calculated as

 Gross Profit (A: Feb. 2016 ) = Revenue - Cost of Goods Sold = 17529 - 14945 = 2,584

SUPERVALU Inc's Gross Profit for the quarter that ended in Nov. 2016 is calculated as

 Gross Profit (Q: Nov. 2016 ) = Revenue - Cost of Goods Sold = 3003 - 2596 = 407

SUPERVALU Inc Gross Profit for the trailing twelve months (TTM) ended in Nov. 2016 was 590 (Feb. 2016 ) + 779 (May. 2016 ) + 562 (Aug. 2016 ) + 407 (Nov. 2016 ) = \$2,338 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

SUPERVALU Inc's Gross Margin for the quarter that ended in Nov. 2016 is calculated as

 Gross Margin (Q: Nov. 2016 ) = Gross Profit (Q: Nov. 2016 ) / Revenue (Q: Nov. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 407 / 3003 = 13.55 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

SUPERVALU Inc had a gross margin of 13.55% for the quarter that ended in Nov. 2016 => No sustainable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

SUPERVALU Inc Annual Data

 Feb07 Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 Feb14 Feb15 Feb16 Gross_Profit 8,139 10,105 10,113 9,153 8,410 8,019 2,294 2,532 2,578 2,584

SUPERVALU Inc Quarterly Data

 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Gross_Profit 572 593 661 810 583 601 590 779 562 407
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