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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

EXCHANGE ACT OF 1934

For the fiscal year ended February 26, 2005

OR

EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 1-5418

SUPERVALU INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (952) 828-4000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes  x    No  ¨

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 11, 2004 was approximately $3,603,630,697 (based upon the closing price of Registrant’s Common Stock on the New York Stock Exchange on September 10, 2004).

Number of shares of $1.00 par value Common Stock outstanding as of April 29, 2005: 136,085,323.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s definitive Proxy Statement filed for the Registrant’s 2005 Annual Meeting of Stockholders are incorporated by reference into Part III, as specifically set forth in Part III.

Index to Financial Statements

PART I

ITEM 1.    BUSINESS

General Development

SUPERVALU is one of the largest companies in the United States grocery channel. SUPERVALU conducts its retail operations under three retail food store formats: extreme value stores primarily under the retail banner Save-A-Lot; price superstores, under the regional retail banners of Cub Foods, Shop ‘n Save, Shoppers Food & Pharmacy and bigg’s; and supermarkets, under the regional retail banners of Farm Fresh, Scott’s and Hornbacher’s. As of the close of the fiscal year, the company conducted its retail operations through 1,549 stores, including 879 licensed extreme value stores. SUPERVALU also provides food distribution and related logistics support services across the United States retail grocery channel. As of the close of the fiscal year, the company served as the primary grocery supplier to approximately 2,300 retail food stores in 48 states, in addition to its own regional banner store network, and as a secondary supplier to approximately 700 stores.

SUPERVALU is focused on retail growth through targeted new store development, remodel activities, licensee growth and acquisitions. During fiscal 2005, the company added 66 net new stores through new store development. The company’s plans also include leveraging its distribution operations by providing logistics and service solutions through an increasingly efficient supply chain, which should allow it to affiliate new independent customers.

On February 7, 2005, the company completed its acquisition of Total Logistics, Inc. (Total Logistics), a national provider of integrated third-party logistics services. The aggregate transaction value was approximately $234 million, including assumed debt and direct costs related to the acquisition. The company expects the acquisition to be slightly accretive to fiscal year 2006 earnings. The Total Logistics acquisition also included its Zero Zone subsidiary, a manufacturer of refrigeration cases and systems, which will be divested in fiscal 2006 as it is non-core to the company’s food retail and supply chain service businesses.

On April 1, 2004 the company sold its minority interest in WinCo Foods, Inc. (WinCo), a privately-held regional grocery chain that operates stores primarily in the northwestern United States, for approximately $150 million in net after-tax cash proceeds. The impact of this transaction to fiscal 2005 results was to reduce net earnings by approximately $0.10 per basic share or $0.09 per diluted share, reflecting the elimination of WinCo’s non-cash equity in earnings, and to increase net earnings by approximately $0.51 per basic share or $0.47 per diluted share for the one-time after-tax gain on the sale.

SUPERVALU INC., a Delaware corporation, was organized in 1925 as the successor to two wholesale grocery firms established in the 1870’s. The company’s principal executive offices are located at 11840 Valley View Road, Eden Prairie, Minnesota 55344 (Telephone: 952-828-4000). Unless the discussion in this Annual Report on Form 10-K indicates otherwise, all references to the “company,” “SUPERVALU” or “Registrant” relate to SUPERVALU INC. and its majority-owned subsidiaries.

The company makes available free of charge at its internet website (www.supervalu.com) its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”). Information on the company’s website is not deemed to be incorporated by reference into this Annual Report on Form 10-K. The company will also provide its SEC filings free of charge upon written request to the Corporate Secretary, SUPERVALU INC., P.O. Box 990, Minneapolis, MN 55440.

Additional description of the company’s business is found in Part II, Item 7 of this report.

Financial Information About Reportable Segments

The company’s business is classified by management into two reportable segments: Retail food and food distribution. Retail food operations include three retail food store formats: extreme value stores, regional price

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superstores and regional supermarkets. The retail operations include results of food stores owned and results of sales to extreme value stores licensed by the company. Food distribution operations include results of sales to affiliated food stores, mass merchants and other customers, and the results of other third party logistics arrangements. Management utilizes more than one measurement and multiple views of data to assess segment performance and to allocate resources to the segments. However, the dominant measurements are consistent with the consolidated financial statements. The financial information concerning the company’s operations by reportable segment for the years ended February 26, 2005, February 28, 2004 and February 22, 2003 is contained on page F-7.

Retail Food Operations

Overview.    At February 26, 2005, the company conducted its retail food operations through a total of 1,549 retail stores, including 879 licensed extreme value stores. Its principal retail food formats include extreme value stores, regional price superstores and regional supermarkets. These diverse formats enable the company to operate in a variety of markets under widely differing competitive circumstances. Based on revenues, the company was the eighth largest grocery retailer in the United States as of February 26, 2005. In fiscal 2006, the company anticipates opening approximately 90 to 110 new extreme value stores, including licensed sites, and 10 to 12 regional banner stores and continuing its store remodeling program.

Extreme Value Stores.    The company operates extreme value stores primarily under the Save-A-Lot banner. Save-A-Lot holds the number one market position, based on revenues, in the extreme value grocery-retailing sector. Save-A-Lot food stores typically are approximately 15,000 square feet in size, and stock approximately 1,250 high volume food items generally in a single size for each product sold, as well as a limited offering of general merchandise items. At a Save-A-Lot store, the majority of the food products offered for sale are custom branded products. The specifications for the Save-A-Lot custom branded product emphasize quality and characteristics that the company believes are comparable to national brands. The company’s attention to the packaging of Save-A-Lot products has resulted in the company registering a number of its custom labels.

At fiscal year end, there were 1,287 extreme value stores, including 466 combination food and general merchandise stores, located in 39 states of which 879 were licensed. These stores are supplied from 16 dedicated distribution centers.

Price Superstores.    The company’s price superstores hold the number one, two or three market position in most of their markets. The price superstore focus is on providing every day low prices and product selection across all departments. Most of the company’s price superstores offer traditional dry grocery departments, along with strong perishable departments and pharmacies. Price superstores carry over 45,000 items and generally range in size from 45,000 to 100,000 square feet with an average size of approximately 64,000 square feet.

At fiscal year end, the company owned and operated 202 price superstores under the Cub Foods, Shop ’n Save, Shoppers Food & Pharmacy and bigg’s banners in 12 states; an additional 31 stores were franchised to independent retailers under the Cub Foods banner. In-store pharmacies are operated in 183 of the price superstores.

The owned Cub Food stores operate primarily in the Minneapolis/St. Paul and Chicago markets; Shop ’n Save operates primarily in the St. Louis and Pittsburgh markets; Shoppers Food & Pharmacy operates in the Washington D.C. and Baltimore markets; and bigg’s operates primarily in the Cincinnati market.

Supermarkets.    The company’s traditional supermarkets hold leading market positions in their principal markets. This format combines a grocery store that offers traditional dry grocery and fresh food departments, and a variety of specialty departments that may include floral, seafood, expanded health and beauty care, video rental, cosmetics, delicatessen, bakery, photo finishing, liquor, as well as an in-store bank and a traditional drug store that includes a pharmacy. A typical supermarket carries approximately 32,000 items and generally ranges in size from 30,000 to 65,000 square feet with an average size of approximately 50,000 square feet.

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At fiscal year end, the company operated 60 supermarkets under the Farm Fresh, Scott’s and Hornbacher’s banners in five states. The Farm Fresh stores operate primarily in the Virginia Beach, Virginia market; the Scott’s stores operate in the Fort Wayne, Indiana market; and the Hornbacher’s stores operate in the Fargo, North Dakota market. In-store pharmacies are operated in 30 of the supermarkets.

Food Distribution Operations

Overview.    SUPERVALU provides logistics and service solutions to retailers for food and non-food products and is the largest public company food wholesaler in the nation. At February 26, 2005, the company was affiliated with approximately 2,300 stores as their primary supplier, excluding the company’s own regional banner store network, and approximately 700 additional stores as a secondary supplier. SUPERVALU’s customers include single and multiple grocery store independent operators, regional and national chains, mass merchants and the military. Such customers are located in 48 states, and range in size from small convenience stores to 200,000 square foot supercenters. SUPERVALU also manages distribution centers and manages dedicated and third party transportation networks for customers of its third party logistics business.

Products Supplied.    The company offers and supplies its distribution customers with a wide variety and selection of food and non-food products, including groceries, meats, dairy products, frozen foods, deli, bakery, fresh fruits and vegetables, health and beauty aids, general merchandise, seasonal items and tobacco products. Such products include national and regional brands, the company’s own lines of private label products and the private label products of its independent customers. The company has no significant long-term purchase obligations and considers that it has adequate and alternative sources of supply for most of its purchased products. SUPERVALU offers two tiers of private label products to its customers: first quality products under such private labels as CUB, FLAVORITE, HOMEBEST, IGA, RICHFOOD, SHOP ’N SAVE, SUPERCHILL, HEALTHY GENERATIONS, DAILY SOURCE, NUTRIPLAN and CHEF’S CIRCLE; and economy products under the private label of SHOPPERS VALUE. SUPERVALU supplies private label merchandise over a broad range of products in the majority of departments in the store. These products are produced to the company’s specifications by many suppliers.

Logistics Network.    The company has established a network of strategically located distribution centers utilizing a multi-tiered logistics system. The network includes facilities that carry slow turn or fast turn groceries, perishables, general merchandise and health and beauty care products. The network comprises 24 distribution facilities. The company believes that its multi-tiered distribution network increases buying scale, improves operating efficiencies and lowers costs of operations. The company is continuing to work on business initiatives that will deliver lower costs of operations. Deliveries to retail stores are made from the company’s distribution centers by company-owned trucks, third party independent trucking companies or customer-owned trucks. In addition, the company provides certain facilitative services between its independent retailers and vendors related to products that are delivered directly by suppliers to retail stores under programs established by the company. These services include sourcing, invoicing and payment services.

Third Party Logistics.    The company also offers third party logistics solutions through its Total Logistics subsidiary, which was acquired in February 2005, and its Advantage Logistics operation, which was formed in 2002. The company is merging most of its Advantage Logistics business into Total Logistics. The combination of these operations provides customers with a suite of logistics services, including warehouse management, transportation, procurement, contract manufacturing and logistics engineering and management services.

Trademarks

The company offers some customers the opportunity to franchise a concept or license a service mark. This program helps the customer compete by providing, as part of the franchise or license program, a complete business concept, group advertising, private label products and other benefits. The company is the franchisor or licensor of certain service marks such as CUB FOODS, SAVE-A-LOT, SENTRY, FESTIVAL FOODS,

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COUNTY MARKET, SHOP ’N SAVE, NEWMARKET, IGA, FOODLAND, JUBILEE, SUPERVALU and SUPERVALU PHARMACIES. The company registers a substantial number of its trademarks/service marks in the United States Patent and Trademark Office, including many of its private label product trademarks and service marks. See “Retail Food Operations—Extreme Value Stores” and “Food Distribution Operations—Products Supplied” for further information. U.S. trademark and service mark registrations are generally for a term of 10 years, renewable every 10 years as long as the trademark is used in the regular course of trade. The company considers certain of its trademarks and service marks to be of material importance to its retail food and food distribution business and actively defends and enforces such trademarks and service marks.

Competition

The company’s retail food and food distribution businesses are highly competitive. The company believes that the success of its retail food and food distribution businesses are dependent upon the ability of the company’s retail food operations, and the retail food stores with whom it is affiliated as a supplier, to compete successfully with other retail food stores. Principal competition comes from regional and national chains operating under a variety of formats that devote square footage to selling food (i.e. supercenters, supermarkets, extreme value stores, membership warehouse clubs, dollar stores, drug stores, convenience stores, various formats selling prepared foods, and other specialty and discount retailers), as well as from independent food store operators. The company believes that the principal competitive factors that face its owned stores, as well as the stores owned by retailers it supplies, include the location and image of the store; the price, quality and variety of products; and the quality and consistency of service.

The food distribution business competes directly with a number of food wholesalers. The company believes it competes in this supply chain on the basis of product price, quality and assortment, schedule and reliability of deliveries, the range and quality of services provided, service fees, and the location of distribution facilities. The company’s third party logistics business competes nationwide in a highly fragmented market place which includes a number of large international and domestic companies, as well as with many smaller, more regional competitors. The company believes that it competes in this business on the basis of warehousing and transportation logistics expertise, cost, and the ability to offer both asset and non-asset based solutions as well as to design and manage a customer’s entire supply chain.

Employees

At February 26, 2005, the company had approximately 56,000 employees. Approximately 23,000 employees are covered by collective bargaining agreements. During fiscal 2005, 17 collective bargaining agreements covering approximately 13,000 employees were re-negotiated. In fiscal 2006, 28 collective bargaining agreements covering approximately 7,500 employees will expire. The company believes that it has generally good relations with its employees.

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ITEM 2.    PROPERTIES

Retail Food Operations

The following table is a summary of the corporate retail stores operated by the company under its principal retail formats as of February 26, 2005:

The extreme value stores that are leased by the company generally have terms of 5 to 10 years plus renewal options. The price superstores and supermarkets that are leased by the company generally have terms of 15 to 25 years plus renewal options.

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Food Distribution Operations

The following table is a summary of the company’s principal distribution centers and office space utilized in the company’s food distribution operations as of February 26, 2005:

Additional Property

The company’s principal executive offices are located in an 180,000 square foot corporate headquarters facility located in Eden Prairie, Minnesota, a western suburb of Minneapolis, Minnesota. This headquarters facility is located on a site of 140 acres owned by the company. Other facilities allocated for corporate use include approximately 189,000 square feet of leased office space located in Chanhassen, Minnesota, 53,000 square feet of owned office space located in Stillwater, Minnesota and 35,000 square feet of leased office space in Denver, Colorado.

Additional information on the company’s properties can be found on pages F-24 through F-26 in the Leases note in the accompanying Notes to Consolidated Financial Statements. Management of the company believes its physical facilities and equipment are adequate for the company’s present needs and businesses.

ITEM 3.    LEGAL PROCEEDINGS

The company is a party to various legal proceedings arising from the normal course of business activities, none of which, in management’s opinion, is expected to have a material adverse impact on the company’s consolidated statement of earnings or consolidated financial position.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There was no matter submitted during the fourth quarter of fiscal year 2005 to a vote of the security holders of the Registrant.

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PART II

The company’s common stock is listed on the New York Stock Exchange under the symbol SVU. As of April 29, 2005, there were 136,085,323 shares of common stock outstanding. At that date, there were 6,485 stockholders of record, excluding individual participants in security position listings. The information called for by Item 5 as to the sales price for the company’s common stock on a quarterly basis during the last two fiscal years and dividend information is found under the heading “Common Stock Price” in Part II, Item 7 of this report. The following table sets forth the registrant’s purchase of equity securities for the periods indicated:

The information called for by Item 6 is found within the Five Year Financial and Operating Summary on page F-2.

OVERVIEW

SUPERVALU is one of the largest grocery companies in the United States. We operate within two selling businesses in the grocery food industry, grocery retail and food distribution. At February 26, 2005, we conducted our retail operations through a total of 1,549 stores of which 879 are licensed locations. Principal formats include extreme value stores, regional price superstores and regional supermarkets. Our food distribution operations

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network spans 48 states and we serve as primary grocery supplier to approximately 2,300 stores, in addition to our own regional banner store network, as well as serving as secondary grocery supplier to approximately 700 stores. Based on revenues today, we would be ranked as the largest extreme value food retailer, eighth largest grocery retailer, and largest public company food wholesaler in the United States.

The grocery food industry can be characterized as one of consolidation and rationalization. The grocery industry also continues to experience store saturation driven primarily by increases in square footage devoted to food in supercenters, club stores, mass merchandisers, dollar stores, drug stores and other alternate formats as well as organic growth by traditional supermarket operators. As a result, same-store sales growth for the industry has been soft, pressuring profitability levels in the industry as operating costs rise at a rate faster than sales growth. We expect this industry environment to continue for the foreseeable future. In fiscal 2006, we anticipate same store sales growth of approximately one percent.

The grocery industry is also affected by the general economic environment and its impact on consumer spending behavior. We would characterize fiscal 2005 as a year with modest economic growth with relatively normal levels of consumer spending and product cost inflation. For fiscal 2006, we expect consumer spending to be pressured by higher fuel prices and modest food inflation.

In fiscal 2005, most businesses, including the labor intensive grocery industry, were again impacted by another year of rising health care and pension costs. Although the rate of increase moderated in fiscal 2005, these rising costs impacted the overall profitability levels of the food industry and have become a pivotal issue in labor negotiations for unionized employees who bargain for health and retirement benefits in addition to wages. Approximately 41 percent of SUPERVALU’s employees are unionized. We did not experience any strikes during fiscal 2005. Approximately 33 percent of our unionized workforce are represented by contracts that are up for renewal in fiscal 2006.

All of these industry factors impact our food distribution customer base. As a result, we continue to experience customer attrition in our food distribution operations. The attrition rate in fiscal 2005 was approximately seven percent, which is above the historical range of approximately two percent to four percent, due primarily to three large customer transitions to other suppliers during the year. For fiscal 2006, we anticipate the attrition rate in this business will be in the upper end of that historical range.

All the above factors will continue to impact our industry and our company in fiscal 2006.

We believe we can be successful against this industry backdrop with our regional retail formats that focus on local execution, merchandising, and consumer knowledge. In addition, our operations will benefit from our efficient and low-cost supply chain and economies of scale as we leverage our retail and distribution operations. Save-A-Lot, our extreme value format, has nationwide potential, and currently operates in 39 states. In fiscal 2005 and in the future, the majority of our new extreme value food stores will be a type of combination store offering both food and general merchandise. We plan to expand regional retail banner square footage through selective new store growth in key markets where we have significant market share. In addition, we will supplement regional retail store growth with continued focus on remodel activities. Given the life cycle maturity of our distribution business with its inherent attrition rate, future growth in food distribution will be modest and primarily achieved through serving new independent customers, net growth from existing customers and further consolidation opportunities. Our recent acquisition of Total Logistics offers a new platform to participate in the fast-growing logistics arena. We remain committed to streamlining our operations and improving our return on invested capital through a variety of initiatives.

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RESULTS OF OPERATIONS

Highlights of results of operations as reported and as a percent of net sales are as follows:

Comparison of fifty-two weeks ended February 26, 2005 (fiscal 2005) with fifty-three weeks ended February 28, 2004 (fiscal 2004):

In fiscal 2005, the company achieved net sales of $19.5 billion compared with $20.2 billion last year. Net earnings for fiscal 2005 were $385.8 million, basic earnings per share were $2.86 and diluted earnings per share were $2.71 compared with net earnings of $280.1 million, basic earnings per share of $2.09 and diluted earnings per share of $2.01 last year. Results for fiscal 2005 include a net after-tax gain on the sale of the company’s minority interest in WinCo of $68.3 million or $0.51 basic earnings per share and $0.47 diluted earnings per share. On February 7, 2005, the company completed the acquisition of Total Logistics and its results are immaterial to fiscal 2005.

Fiscal 2004 was a 53 week fiscal year, resulting in an extra week in the fourth quarter, which generated approximately $360.0 million in net sales and contributed approximately $.07 to basic and diluted earnings per share. Fiscal 2004 operating results include the impact of the asset exchange with C&S Wholesale Grocers (Asset Exchange), the sale and closure of the company’s Denver based operations that included nine retail stores and a food distribution facility (Denver Disposition) and in St. Louis, where we operate 21 regional supermarkets, we experienced a 28-day strike in fiscal 2004 (St. Louis Strike).

Net Sales

Net sales for fiscal 2005 were $19.5 billion compared with $20.2 billion last year, a decrease of $0.7 million or 3.3 percent from last year. Retail food sales were 54.0 percent of net sales for fiscal 2005 compared with 52.2 percent last year. Food distribution sales were 46.0 percent of net sales for fiscal 2005 compared with 47.8 percent last year.

Retail food sales for fiscal 2005 were $10.5 billion, flat compared to last year, primarily reflecting net new store and same store sales growth, which was fully offset by the absence of last year’s extra week of approximately $0.2 billion. Fiscal 2005 same store retail sales, defined as stores operating for four full quarters, including store expansions, increased 0.3 percent.

Fiscal 2005 store activity, including licensed units, resulted in 104 new stores opened and 38 stores closed, for a total of 1,549 stores at year end. Total square footage increased approximately 4.2 percent over the prior year.

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Food distribution sales for fiscal 2005 were $9.0 billion compared with $9.7 billion last year, a decrease of $0.7 billion. Food distribution sales decreased 6.9 percent compared with last year, reflecting new business growth of approximately 5 percent, which was more than offset by customer attrition, last year’s Asset Exchange and the absence of the extra week in last year, which accounted for approximately seven percent, three percent and two percent, respectively.

Gross Profit

Gross profit (calculated as net sales less cost of sales), as a percent of net sales, was 14.6 percent for fiscal 2005 compared with 14.1 percent last year. The increase in gross profit, as a percent of net sales, primarily reflects the growing proportion of our retail food business, which operates at a higher gross profit margin as a percentage of net sales than does the food distribution business, benefits of retail merchandising execution and customer mix and the benefit of volume throughput including labor productivity improvements in distribution.

Selling and Administrative Expenses

Selling and administrative expenses, as a percentage of net sales, were 11.4 percent for fiscal 2005 compared with 11.0 percent last year. The increase in selling and administrative expenses, as a percent of net sales, primarily reflects the growing proportion of the company’s retail food business, which operates at a higher selling and administrative expense as a percent of net sales than does the food distribution business.

Restructure and Other Charges

In fiscal 2005, the company incurred $26.4 million, or 0.1 percent of net sales, in pre-tax restructure and other charges, consisting of $18.0 million for increased liabilities associated with employee benefit related costs from previously exited food distribution facilities and $8.4 million for changes in estimates on exited real estate. In fiscal 2004, the company incurred $15.5 million, or 0.1 percent of net sales in pre-tax restructure and other charges, consisting of $7.0 million for changes in estimates on exited real estate for food distribution and $8.5 million for increased liabilities associated with employee benefit related costs from previously exited food distribution facilities.

Operating Earnings

Operating earnings for fiscal 2005 increased 19.0 percent to $715.6 million compared with $601.4 million last year, primarily reflecting the fiscal 2005 $109.2 million pre-tax gain on the sale of WinCo. Fiscal 2005 operating earnings include $26.4 million in pre-tax restructure and other charges. Fiscal 2004 operating earnings include $15.5 million in pre-tax restructure and other charges. Retail food operating earnings for fiscal 2005 increased 0.5 percent to $446.3 million, or 4.2 percent of net sales, from last year’s operating earnings of $444.0 million, or 4.2 percent of net sales. The increase in retail food operating earnings primarily reflects the benefits of retail merchandising execution, which offset the absence of last year’s extra week and WinCo earnings. Food distribution operating earnings for fiscal 2005 increased 5.4 percent to $234.6 million, or 2.6 percent of net sales, from last year’s operating earnings of $222.5 million, or 2.3 percent of net sales. The increase in food distribution operating earnings primarily reflects customer mix and the benefit of volume throughput including labor productivity improvements, which more than offset the absence of last year’s extra week.

Net Interest Expense

Net interest expense was $114.8 million in fiscal 2005 compared with $146.5 million last year. The decrease primarily reflects lower borrowing levels.

Income Taxes

The overall effective tax rate was 35.8 percent and 38.4 percent in fiscal 2005 and fiscal 2004, respectively. Last year’s effective tax rate reflects $7.6 million of taxes related to the Asset Exchange. In both fiscal 2005 and fiscal 2004, the effective tax rate reflects the impact of net favorable tax settlements occurring in each year.

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Net Earnings

Net earnings were $385.8 million, or $2.86 per basic share and $2.71 per diluted share, in fiscal 2005 compared with net earnings of $280.1 million, or $2.09 per basic share and $2.01 per diluted share last year. Results for fiscal 2005 include a net after-tax gain on the sale of the company’s minority interest in WinCo of $68.3 million or $0.51 basic earnings per share and $0.47 diluted earnings per share.

Weighted average basic shares increased to 135.0 million in fiscal 2005 compared to 134.0 million in fiscal 2004 and weighted average diluted shares increased to 144.9 million in fiscal 2005 compared with 143.2 million shares last year, reflecting the net impact of stock option activity and shares repurchased under the treasury stock program.

Comparison of fifty-three weeks ended February 28, 2004 (fiscal 2004) with fifty-two weeks ended February 22, 2003 (fiscal 2003):

In fiscal 2004, the company achieved net sales of $20.2 billion compared with $19.2 billion in fiscal 2003. Net earnings for fiscal 2004 were $280.1 million, basic earnings per share were $2.09 and diluted earnings per share were $2.01 compared with net earnings of $257.0 million, basic earnings per share of $1.92 and diluted earnings per share of $1.86 for fiscal 2003. Fiscal 2004 was a 53 week fiscal year, resulting in an extra week in the fourth quarter, which generated approximately $0.4 billion in net sales and contributed approximately $.07 to basic and diluted earnings per share. Fiscal 2004 operating results include the impact of the Asset Exchange, the Denver Disposition and the St. Louis Strike.

Net Sales

Net sales for fiscal 2004 were $20.2 billion compared with $19.2 billion for fiscal 2003, an increase of $1.0 billion or 5.5 percent. Retail food sales were 52.2 percent of net sales for fiscal 2004 compared with 51.4 percent for fiscal 2003. Food distribution sales were 47.8 percent of net sales for fiscal 2004 compared with 48.6 percent in fiscal 2003.

Retail food sales for fiscal 2004 were $10.6 billion compared with $9.9 billion last year, an increase of 7.1 percent or $0.7 billion which included approximately $0.2 billion due to the benefit of the extra week. The remainder of the increase was due to net new store and same store sales growth, which accounted for approximately 70 percent and 30 percent of the increase, respectively. Fiscal 2004 same store retail sales, defined as stores operating for four full quarters, including store expansions, increased 2.1 percent.

Fiscal 2004 store activity, including licensed units, resulted in 107 new stores opened and 41 stores closed, including the sale or closure of our Denver based stores, for a total of 1,483 stores at year end. Total square footage increased approximately 3.8 percent over the prior year.

Food distribution sales were $9.7 billion for fiscal 2004 compared to $9.3 billion in fiscal 2003, an increase of $0.4 billion. Food distribution sales increased 3.7 percent compared with fiscal 2003, primarily reflecting the impact of new customer affiliations and the benefit of the extra week, which accounted for approximately seven percent and two percent, respectively and more than offset customer attrition, and the net revenue loss resulting from of the Asset Exchange which accounted for approximately three percent and two percent, respectively.

Gross Profit

Gross profit (calculated as net sales less cost of sales), as a percent of net sales, was 14.1 percent for fiscal 2004 compared with 13.5 percent in fiscal 2003. The increase in gross profit, as a percent of net sales, primarily reflects improved merchandising execution for retail, including the expansion of general merchandise in the

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extreme value format, and the growing proportion of our retail food business, which operates at a higher gross profit margin as a percentage of net sales than does the food distribution business.

Selling and Administrative Expenses

Selling and administrative expenses, as a percentage of net sales, were 11.0 percent for fiscal 2004 compared with 10.5 percent in fiscal 2003. The increase in selling and administrative expenses, as a percent of net sales, primarily reflects increases in employee benefit and incentive related costs, costs associated with the Denver Disposition, including related reserves for closed stores and $10.8 million in additional reserves for non-operating properties.

Restructure and Other Charges

In fiscal 2004, the company incurred $15.5 million, or 0.1 percent of net sales, in pre-tax restructure and other charges, consisting of $7.0 million for changes in estimates on exited real estate in certain markets for food distribution and $8.5 million for increased liabilities associated with employee benefit related costs from previously exited food distribution facilities.

Operating Earnings

Operating earnings for fiscal 2004 increased 5.5 percent to $601.4 million compared with $569.9 million in fiscal 2003. Fiscal 2004 operating earnings include $15.5 million in pre-tax restructure and other charges. Fiscal 2003 operating earnings include $2.9 million in pre-tax restructure and other charges. Retail food operating earnings for fiscal 2004 increased 1.7 percent to $444.0 million, or 4.2 percent of net sales, from last year’s operating earnings of $436.5 million, or 4.4 percent of net sales. The increase in retail food operating earnings was primarily due to growth of new stores, improved merchandising execution and the benefit of the extra week which were substantially offset by increases in employee benefit and incentive related costs, costs associated with the Denver Disposition, including related reserves for closed stores, and the impact of the St. Louis Strike. Food distribution operating earnings for fiscal 2004 increased 29.6 percent to $222.5 million, or 2.3 percent of net sales, from fiscal 2003’s operating earnings of $171.6 million, or 1.8 percent of net sales. The increase in food distribution operating earnings primarily reflects the increase in sales volume, benefits of efficiency initiatives implemented during the course of the prior year and the benefit of the extra week.

Net Interest Expense

Net interest expense was $146.5 million in fiscal 2004 compared with $161.9 million in fiscal 2003. The decrease primarily reflects lower borrowing levels that more than offset $5.8 million in pre-tax costs related to the early redemption of $100.0 million of debt at a price of 103.956 percent in the third quarter of fiscal 2004.

Income Taxes

The effective tax rate was 38.4 percent and 37.0 percent in fiscal 2004 and fiscal 2003, respectively. The increase in the effective tax rate in fiscal 2004 was due to $7.6 million of taxes due on the Asset Exchange.

Net Earnings

Net earnings were $280.1 million, or $2.09 per basic share and $2.01 per diluted share, in fiscal 2004 compared with net earnings of $257.0 million, or $1.92 per basic share and $1.86 per diluted share in fiscal 2003.

Weighted average basic shares increased to 134.0 million in fiscal 2004 compared with 133.7 million in fiscal 2003. Weighted average diluted shares increased to 143.2 million in fiscal 2004 compared with 142.7 million shares in fiscal 2003, reflecting the net impact of stock option activity and shares repurchased under the treasury stock program.

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Index to Financial Statements

RESTRUCTURE AND OTHER CHARGES

In fiscal 2000, 2001, and 2002, the company commenced restructuring programs designed to reduce costs and enhance efficiencies and included facility consolidation and disposal of non-core assets and assets not meeting return objectives or providing long-term strategic opportunities. The restructuring plans resulted in the company recording pre-tax restructure and other charges in fiscal 2000, 2001 and 2002.

In fiscal 2003, all activity for the fiscal 2002, 2001 and 2000 restructure plans was completed. The table below shows the remaining restructure reserves for the 2002, 2001, and 2000 plans as of February 26, 2005, as well as reserve related activity for the three fiscal years then ended.

The company recognized pre-tax restructure and other charges of $26.4 million, $15.5 million and $2.9 million for fiscal years 2005, 2004, and 2003 respectively. These charges reflect changes in liabilities associated with employee benefit related costs from previously exited distribution facilities as well as changes in estimates on exited real estate, including asset impairment. Fiscal 2005 charges related primarily to restructure 2001 and consisted of reserve adjustments of $22.3 million, asset impairment charges of $0.5 million, and property holding costs of $3.6 million. Fiscal 2004 charges reflect the net adjustments to the restructure reserves of $12.8 million, as well as asset impairment adjustments of $2.7 million for restructure 2001. Fiscal 2003 charges reflect the net adjustments to the restructure reserves of $11.0 million, as well as asset impairment adjustments of $(3.6) million and $(4.5) million for restructure 2001 and 2000, respectively.

The remaining 2001 restructure reserves includes $25.9 million for employee benefit related costs and $16.4 million for lease related costs for exited properties. In fiscal 2005, there was an increase in 2001 restructure reserves of $22.3 million for employee benefit related costs for multiemployer plan liabilities resulting from withdrawal notices received in fiscal 2005 for previously exited distribution facilities and changes in estimates on exited real estate of $18.0 million and $4.3 million, respectively.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies are discussed in the Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements. Management believes the following critical accounting policies reflect its more subjective or complex judgments and estimates used in the preparation of the company’s consolidated financial statements.

Allowances for Losses on Receivables

Management makes estimates of the uncollectibility of its accounts and notes receivable portfolios. In determining the adequacy of the allowances, management analyzes the value of the collateral, customer financial

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Index to Financial Statements

statements, historical collection experience, aging of receivables and other economic and industry factors. Although risk management practices and methodologies are utilized to determine the adequacy of the allowance, it is possible that the accuracy of the estimation process could be materially impacted by different judgments as to collectibility based on the information considered and further deterioration of accounts.

LIFO and Retail Inventory Method

Inventories are stated at the lower of cost or market. Market is replacement value. Substantially all of the company’s inventory is finished goods.

For a significant portion of the company’s inventory, cost is determined through use of the last-in, first-out (LIFO) method. The company utilized LIFO to value approximately 64 percent and 68 percent of the company’s consolidated inventories for fiscal 2005 and 2004, respectively.

The retail inventory method (RIM) is used to value retail inventory. The valuation of inventories is at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. RIM is an averaging method that has been widely used in the retail industry due to its practicality. Inherent in the RIM calculations are certain significant management judgments and estimates, including shrinkage, which significantly impact the ending inventory valuation at cost, as well as the resulting gross margins. These judgments and estimates, coupled with the fact that the RIM is an averaging process, can, under certain circumstances, produce results which differ from actual. Management believes that the company’s RIM provides an inventory valuation which reasonably approximates cost and results in carrying inventory at the lower of cost or market.

The company evaluates inventory shortages throughout the year based on actual physical counts in its facilities. Allowances for inventory shortages are recorded based on the results of these counts to provide for estimated shortages as of the financial statement date.

Reserves for Closed Properties and Asset Impairment Charges

The company maintains reserves for estimated losses on retail stores, distribution warehouses and other properties that are no longer being utilized in current operations. The company provides for closed property lease liabilities using a discount rate to calculate the present value of the remaining noncancellable lease payments after the closing date, net of estimated subtenant income. The closed property lease liabilities usually are paid over the remaining lease terms, which generally range from one to fifteen years. The company estimates subtenant income and future cash flows based on the company’s experience and knowledge of the market in which the closed property is located, the company’s previous efforts to dispose of similar assets and current economic conditions.

Owned properties that are closed are reduced to their estimated net realizable value. Reduction in the carrying values of property, equipment and leasehold improvements are recognized when expected net future cash flows are less than the assets’ carrying value. The company estimates net future cash flows based on its experience and knowledge of the market in which the closed property is located and, when necessary, utilizes local real estate brokers.

Adjustments to closed property reserves primarily relate to changes in subtenant income or actual exit costs differing from original estimates. Adjustments are made for changes in estimates in the period in which the changes become known.

The expectations on timing of disposition or sublease and the estimated sales price or sublease income associated with closed properties are impacted by variable factors such as inflation, the general health of the economy, resultant demand for commercial property, the ability to secure subleases, the creditworthiness of sublessees and the company’s success at negotiating early termination agreements with lessors. While

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Index to Financial Statements

management believes the current estimates on closed properties are adequate, it is possible that market conditions could cause changes in the company’s assumptions and may require additional reserves and asset impairment charges to be recorded.

Reserves for Self Insurance

The company is primarily self-insured for workers’ compensation, health care for certain employees and general and automobile liability costs. It is the company’s policy to record its self-insurance liabilities based on claims filed and an estimate of claims incurred but not yet reported, discounted at a risk free interest rate. Any projection of losses concerning workers’ compensation, health care and general and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting future inflation rates, discount rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. A 100 basis point change in discount rates, based on changes in market rates would increase the company’s liability by approximately $1 million.

Benefit Plans

The company sponsors pension and other post retirement plans in various forms covering substantially all employees who meet eligibility requirements. The determination of the company’s obligation and related expense for company sponsored pension and other post retirement benefits is dependent, in part, on management’s selection of certain assumptions used by its actuaries in calculating these amounts. These assumptions include, among other things, the discount rate, the expected long-term rate of return on plan assets and the rates of increase in compensation and health care costs. In accordance with generally accepted accounting principles, actual results that differ from the company’s assumptions are accumulated and amortized over future periods and, therefore, affect its recognized expense and obligation in future periods. While the company believes that its assumptions are appropriate, significant differences in actual experience or significant changes in assumptions may materially impact non-union pension and other post retirement obligations and future expenses.

For fiscal 2006, when not considering other changes in assumptions, the impact to pension expense of each 25 basis point reduction in the discount rate is to increase pension expense by approximately $3 million and the impact of each 25 basis point reduction in expected return on plan assets is to increase pension expense by approximately $1 million. For post retirement, a one percent increase in the health care cost trend rate would increase the accumulated post retirement benefit obligation by approximately $11 million and the service and interest cost by $1 million in fiscal 2005. In contrast, a one percent decrease in the health care cost trend rate would decrease the accumulated post retirement benefit obligation by approximately $10 million and the service and interest cost by approximately $1 million in fiscal 2005. The actuarial assumptions used by the company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, and longer or shorter life spans of participants.

Goodwill

Management assesses the valuation of goodwill for each of the company’s reporting units on an annual basis through the comparison of the fair value of the respective reporting unit with its carrying value. Fair value is determined primarily based on valuation studies performed by the company, which utilize a discounted cash flow methodology. Valuation analysis requires significant judgments and estimates to be made by management. The company’s estimates could be materially impacted by factors such as competitive forces, customer behaviors, changes in growth trends and specific industry conditions.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $791.6 million, $846.8 million and $583.5 million in fiscal 2005, 2004 and 2003, respectively. The decrease in cash from operating activities in fiscal 2005 from fiscal 2004 is primarily related to changes in working capital.

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Index to Financial Statements

Net cash used in investing activities was $161.8 million, $271.6 million and $330.6 million in fiscal 2005, 2004 and 2003, respectively. Fiscal 2005 and 2004 investing activities primarily reflect capital spending to fund retail store expansion, store remodeling and technology enhancements. Fiscal 2005 activities also include the acquisition of Total Logistics and the proceeds from the sale of WinCo.

Net cash used in financing activities was $457.8 million, $312.5 million, and $235.9 million in fiscal 2005, 2004 and 2003, respectively. Fiscal 2005 financing activities primarily reflect the early redemption of $250.0 million of the company’s 7.625 percent notes due in September 2004, the payment of approximately $60 million in Total Logistics assumed debt, the payment of dividends of $80.2 million and the purchase of treasury shares of $56.0 million. Fiscal 2004 financing activities primarily reflect the early redemption of $100.0 million of the company’s 8.875 percent notes due in 2022 at the redemption price of 103.956 percent of the principal amount of the notes, the net reduction in notes payable of $80.0 million, the payment of dividends of $77.0 million and the purchase of treasury shares of $14.6 million.

Management expects that the company will continue to replenish operating assets with internally generated funds. There can be no assurance, however, that the company’s business will continue to generate cash flow at current levels. The company will continue to obtain short-term financing from its revolving credit agreement with various financial institutions, as well as through its accounts receivable securitization program. Long-term financing will be maintained through existing and new debt issuances. The company’s short-term and long-term financing abilities are believed to be adequate as a supplement to internally generated cash flows to fund its capital expenditures and acquisitions as opportunities arise. Maturities of debt issued will depend on management’s views with respect to the relative attractiveness of interest rates at the time of issuance and other debt maturities.

As of February 26, 2005, the company’s current portion of outstanding debt including obligations under capital leases was $99.5 million. The company had no outstanding borrowings under its unsecured $650.0 million revolving credit facility. Letters of credit outstanding under the credit facility were $141.5 million and the unused available credit under the facility was $508.5 million. The company also had $27.1 million of outstanding letters of credit issued under separate agreements with financial institutions.

Subsequent to fiscal year-end, on February 28, 2005, the company executed a five year unsecured $750.0 million revolving credit agreement replacing the previous $650.0 million revolving credit agreement which was terminated. Amounts utilized under this credit agreement have rates tied to LIBOR plus 0.275 to 0.675 percent and there are facility fees ranging from 0.10% to 0.20% on the total amount of the facility, both based on the company’s credit ratings. The agreement contains various financial covenants including ratios for interest coverage and debt leverage. All letters of credit that had been issued and outstanding under the previous credit facility were transferred under the new credit facility.

On May 3, 2004, the company voluntarily redeemed $250 million of 7.625 percent notes due September 15, 2004, in accordance with the note redemption provisions.

In August 2004, the company renewed its annual accounts receivable securitization program, under which the company can borrow up to $200.0 million on a revolving basis, with borrowings secured by eligible accounts receivable. No borrowings were outstanding under this program at February 26, 2005 and February 28, 2004.

In November 2001, the company sold zero-coupon convertible debentures having an aggregate principal amount at maturity of $811.0 million. The proceeds from the offering, net of approximately $5.0 million of expenses, were $208.0 million and were initially used to pay down notes payable and were later used to retire a portion of the $300.0 million in debt that matured in November 2002. The debentures mature in 30 years and are callable at the company’s option on or after October 1, 2006. Holders may require the company to purchase all or a portion of their debentures on October 1, 2006 or October 1, 2011 at a purchase price equal to the accreted value of the debentures, which includes accrued and unpaid cash interest. If the option is exercised, the company has the choice of paying the holder in cash, common stock or a combination of the two. Generally, except upon the occurrence of specified events, holders of the debentures are not entitled to exercise their conversion rights until the closing price of the company’s common stock on the New York Stock Exchange for twenty of the last

17

Index to Financial Statements

thirty trading days of any fiscal quarter exceeds certain levels, at $38.13 per share for the quarter ending June 18, 2005, and rising to $113.29 per share at September 6, 2031. In the event of conversion, 9.6434 shares of the company’s common stock will be issued per $1,000 debenture or approximately 7.8 million shares should all debentures be converted. The debentures have an initial yield to maturity of 4.5 percent, which is being accreted over the life of the debentures using the effective interest method. The company will pay contingent cash interest for the six-month period commencing November 3, 2006, and for any six-month period thereafter if the average market price of the debentures for a five trading day measurement period preceding the applicable six-month period equals 120 percent or more of the sum of the issue price and accrued original issue discount for the debentures. The debentures are classified as long-term debt based on the company’s ability and intent to refinance the obligation with long-term debt if the company is required to repurchase the debentures.

The debt agreements contain various financial covenants including ratios for fixed charge interest coverage, asset coverage and debt leverage, in addition to a minimum net worth covenant as defined in the company’s debt agreements. The company has met the financial covenants under the debt agreements as of February 26, 2005.

The company is party to a synthetic leasing program for one of its major warehouses. The lease expires April 2008, may be renewed with the lessor’s consent through April 2013 and has a purchase option of approximately $60 million.

The company repurchases shares of the company’s common stock under programs authorized by the Board of Directors, for re-issuance upon the exercise of employee stock options and for other compensation programs utilizing the company’s stock. The company repurchased 2.0 million, 0.6 million and 1.5 million shares of common stock at an average cost per share of $28.30, $23.80, and $27.94 during fiscal 2005, 2004, and 2003, respectively. As of February 26, 2005, approximately 4.6 million shares remained available for purchase under the 5.0 million share repurchase program authorized by the Board of Directors in May 2004.

SFAS No. 87, “Employers’ Accounting for Pension,” requires that a prepaid pension asset or minimum pension liability, based on the current market value of plan assets and the accumulated benefit obligation of the plan, be reflected. Based on both performance of the pension plan assets and plan assumption changes, the company’s accumulated other comprehensive loss for minimum pension liability is $104.6 million after-tax as of February 26, 2005. This accumulated other comprehensive loss for minimum pension liability will be revised in future years depending upon market performance and interest rate levels.

The company’s capital budget for fiscal 2006, which includes capitalized leases, is projected at approximately $500.0 million to $550.0 million, compared with actual spending of $325.7 million in fiscal 2005 including $62.9 million of capital leases. The capital budget for 2006 anticipates cash spending of $410.0 million to $460.0 million, in addition to approximately $90 million for capital leases. Approximately $315.0 million of the fiscal 2006 budget has been identified for use in the company’s retail food business and includes approximately 10 to 12 new regional banner stores, approximately 90 to 110 new extreme value combination stores, including licensed sites, and approximately 20 regional banner major store remodels. The 2006 capital budget also includes capital for distribution projects, distribution maintenance capital and information technology related items. In addition, the company will continue to support store development and financing for the company’s independent retailers. Certain retailer financing activities may not require cash outlays because they involve leases or guarantees. The capital budget does include amounts for projects which are subject to change and for which firm commitments have not been made.

Annual cash dividends declared for fiscal 2005, 2004 and 2003, were $.6025, $0.5775 and $0.5675 per common share, respectively. The company’s dividend policy will continue to emphasize a high level of earnings retention for growth.

COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS

The company has guaranteed certain leases, fixture financing loans and other debt obligations of various retailers at February 26, 2005. These guarantees were generally made to support the business growth of affiliated

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Index to Financial Statements

retailers. The guarantees are generally for the entire term of the lease or other debt obligation with remaining terms that range from less than one year to twenty-two years, with a weighted average remaining term of approximately eleven years. For each guarantee issued, if the affiliated retailer defaults on a payment, the company would be required to make payments under its guarantee. Generally, the guarantees are secured by indemnification agreements or personal guarantees of the affiliated retailer. At February 26, 2005, the maximum amount of undiscounted payments the company would be required to make in the event of default of all guarantees was approximately $210 million and represented approximately $121 million on a discounted basis. No amount has been accrued for the company’s obligation under its guaranty arrangements.

The company is contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. The company could be required to satisfy the obligations under the leases if any of the assignees are unable to fulfill their lease obligations. Due to the wide distribution of the company’s assignments among third parties, and various other remedies available, the company believes the likelihood that it will be required to assume a material amount of these obligations is remote.

The company is party to a synthetic leasing program for one of its major warehouses. The lease expires in April 2008 and may be renewed with the lessor’s consent through April 2013, and has a purchase option of $60.0 million. At February 26, 2005, the estimated market value of the property underlying this lease approximately equaled the purchase option. The company’s obligation under its guaranty arrangements related to this synthetic lease had a carrying balance of $1.6 million, which is reflected as a component of other liabilities in the Consolidated Balance Sheet at February 26, 2005.

The company had $168.6 million of outstanding letters of credit as of February 26, 2005, of which $141.5 million were issued under the credit facility and $27.1 million were issued under separate agreements with financial institutions. These letters of credit primarily support workers’ compensation, merchandise import programs and payment obligations. The company pays fees, which vary by instrument, of up to 1.125 percent on the outstanding balance of the letters of credit.

The company is a party to various legal proceedings arising from the normal course of business activities, none of which, in management’s opinion, is expected to have a material adverse impact on the company’s consolidated financial position.

The company is a party to a variety of contractual agreements under which the company may be obligated to indemnify the other party for certain matters, which indemnities may be secured by operation of law or otherwise, in the ordinary course of business. These contracts primarily relate to the company’s commercial contracts, operating leases and other real estate contracts, financial agreements, agreements to provide services to the company, and agreements to indemnify officers, directors and employees in the performance of their work. While the company’s aggregate indemnification obligation could result in a material liability, the company is aware of no current matter that it expects to result in a material liability.

19

Index to Financial Statements

The following table represents the company’s significant contractual obligations and off-balance sheet arrangements at February 26, 2005.

COMMON STOCK PRICE

SUPERVALU’s common stock is listed on the New York Stock Exchange under the symbol SVU. At fiscal 2005 year end, there were 6,483 shareholders of record compared with 6,839 at the end of fiscal 2004.

Dividend payment dates are on or about the 15th day of March, June, September and December, subject to the Board of Directors approval.

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Index to Financial Statements

NEW ACCOUNTING STANDARDS

In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) No. 46, “Consolidation of Variable Interest Entities” (FIN 46), and revised it in December 2003. FIN 46 addresses how a business should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46 applied immediately to entities created after January 31, 2003, and no later than the end of the first reporting period that ended after December 15, 2003 to entities considered to be special-purpose entities (SPEs). FIN 46 was effective for all other entities no later than the end of the first interim or annual reporting period ending after March 15, 2004. The adoption of the provisions of FIN 46 relative to SPEs and for entities created after January 31, 2003 did not have an impact on the company’s consolidated financial statements. The other provisions of FIN 46 did not have an impact on the company’s consolidated financial statements.

In December 2003, the FASB issued SFAS No. 132 (Revised 2003), “Employers’ Disclosures about Pensions and Other Post Retirement Benefits—An Amendment of FASB Statements No. 87, 88 and 106.” This statement increases the existing disclosure’s requirements by requiring more details about pension plan assets, benefit obligations, cash flows, benefit costs and related information. The effect of the revisions to SFAS No. 132 are included in the Benefit Plans note in the Notes to Consolidated Financial Statements.

In May 2004, the FASB issued Financial Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” FSP No. 106-2 supersedes FSP No. 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” and provides guidance on the accounting and disclosures related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Medicare Act) which was signed into law in December 2003. Except for certain nonpublic entities, FSP 106-2 is effective for the first interim or annual period beginning after June 15, 2004. The company adopted FSP 106-2 in the second quarter of fiscal 2005 using the retroactive application method and the fiscal 2005 impact was immaterial to the consolidated financial statements. Based upon current guidance around the definition of actuarially equivalent, equivalence was only determined with respect to a portion of the plan participants depending on plan benefits provided. If additional clarifying regulations related to the Medicare Act or the definition of actuarially equivalent becomes available, remeasurement of the plan obligations may be required, and related impacts on net periodic benefit costs would be reflected prospectively in the consolidated financial statements.

In November 2004, the FASB ratified the effective date of the Emerging Issues Task Force (EITF) consensus on Issue No. 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share” to be applied to reporting periods ending after December 15, 2004. Under EITF Issue No. 04-8, net earnings and diluted shares outstanding, used for earnings per share calculations, would be restated using the if-converted method of accounting to reflect the contingent issuance of 7.8 million shares under the company’s outstanding contingently convertible zero-coupon debentures which were issued in November 2001. The company adopted the provisions of EITF 04-8 in the fourth quarter of fiscal 2005 and restated prior years’ diluted earnings per share amounts. The impact of EITF No. 04-8 reduced diluted earnings per share by $0.11 ($0.08 excluding the gain on the sale of WinCo) in fiscal 2005. The impact of the EITF 04-8 restatement reduced diluted earnings per share by approximately $0.06 and $0.05 in fiscal 2004 and 2003, respectively.

In December 2004, the FASB issued FASB Statement 123 (Revised 2004), “Share-Based Payment.” This revised statement, which is effective for fiscal years beginning after June 15, 2005, requires all share-based payments to employees to be recognized in the financial statements based on their fair values. The company currently accounts for its share-based payments to employees under the intrinsic value method of accounting set forth in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issues to Employees.” Additionally, the company complies with the stock-based employer compensation disclosure requirements of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123.” The company is in the process of evaluating the use of certain option-pricing models

21

Index to Financial Statements

as well as the assumptions to be used in such models. The company plans to adopt the revised statement in its first quarter of its fiscal year 2007, which begins on February 26, 2006.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The company is exposed to market pricing risk consisting of interest rate risk related to debt obligations outstanding, its investment in notes receivable and, from time to time, derivatives employed to hedge interest rate changes on variable and fixed rate debt. The company does not use financial instruments or derivatives for any trading or other speculative purposes.

The company manages interest rate risk through the strategic use of fixed and variable rate debt and, to a limited extent, derivative financial instruments. Variable interest rate debt (commercial paper, bank loans, industrial revenue bonds and other variable interest rate debt) is utilized to help maintain liquidity and finance business operations. Long-term debt with fixed interest rates is used to assist in managing debt maturities and to diversify sources of debt capital.

The company makes long-term loans to certain retail customers (see Notes Receivable in the accompanying Notes to Consolidated Financial Statements for further information) and as such, carries notes receivable in the normal course of business. The notes generally bear fixed interest rates negotiated with each retail customer. The market value of the fixed rate notes is subject to change due to fluctuations in market interest rates.

The table below provides information about the company’s financial instruments that are sensitive to changes in interest rates, including notes receivable, debt obligations and interest rate swap agreements. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For notes receivable, the table presents the expected collection of principal cash flows and weighted average interest rates by expected maturity dates. For interest rate swap agreements, the table presents the estimate of the differentials between interest payable and interest receivable under the swap agreements implied by the yield curve utilized to compute the fair value of the interest rate swaps.

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Index to Financial Statements

Cautionary Statements for Purposes of the Safe Harbor Provisions of the Securities Litigation Reform Act

Any statements contained in this report regarding the outlook for our businesses and their respective markets, such as projections of future performance, statements of our plans and objectives, forecasts of market trends and other matters, are forward-looking statements based on our assumptions and beliefs. Such statements may be identified by such words or phrases as “will likely result,” “are expected to,” “will continue,” “outlook,” “will benefit,” “is anticipated,” “estimate,” “project,” “management believes” or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed in such statements and no assurance can be given that the results in any forward-looking statement will be achieved. For these statements, the company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to subsequently revise any forward-looking statement to reflect events or circumstances after such date or to reflect the occurrence of anticipated or unanticipated events.

The following is a summary of certain factors, the results of which could cause our future results to differ materially from those expressed or implied in any forward-looking statements contained in this report. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement; however, they should not be construed as exhaustive.

Our retail food business faces competition from other retail chains, supercenters, non-traditional competitors and emerging alterative formats in the markets where we have retail operations. In our food distributions business, our success depends in part on the ability of our independent retailer customers to compete with these same formats, our ability to attract new customers, and our ability to supply products in a cost effective manner. Declines in the level of retail sales activity of our distribution customers due to competition; consolidations of retailers or competitors; increased self-distribution by our customers; or the entry of new or non-traditional distribution systems into the industry may adversely affect our revenues.

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Index to Financial Statements

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by Item 7A is found under the heading of “Quantitative and Qualitative Disclosure About Market Risk” under Part II, Item 7 of this report.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by Item 8 is found in a separate section of this report on pages F-1 through F-37. See “Index of Selected Financial Data and Financial Statements and Schedules” on page F-1.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.    CONTROLS AND PROCEDURES

The company carried out an evaluation, under the supervision and with the participation of the company’s management, including the company’s chief executive officer and its chief financial officer, of the effectiveness of the design and operation of the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”)) as of February 26, 2005 the end of the period covered by this report. Based upon that evaluation, the chief executive officer and chief financial officer concluded that as of the Evaluation Date, the company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange commission rules and forms.

Management’s Annual Report on Internal Control Over Financial Reporting

The financial statements, financial analyses and all other information included in this Annual Report on Form 10-K were prepared by the company’s management, which is responsible for establishing and maintaining adequate internal control over financial reporting.

The company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

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Index to Financial Statements

accordance with generally accepted accounting principles. The company’s internal control over financial reporting includes those policies and procedures that:

There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time.

Management assessed the design and effectiveness of the company’s internal control over financial reporting as of February 26, 2005. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on management’s assessment using this framework, it believes that, as of February 26, 2005, the company’s internal control over financial reporting is effective.

Management’s assessment of the effectiveness of the company’s internal control over financial reporting as of February 26, 2005, excluded Total Logistics, Inc., which was acquired by the company in February 2005 in a purchase business combination. Total Logistics, Inc. is a wholly-owned subsidiary of the company whose total assets and total net sales represented less than 1% of consolidated total assets and less than 1% of consolidated net sales of the company as of and for the fiscal year ended February 26, 2005. Companies are allowed to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition under guidelines established by the Securities and Exchange Commission.

Management’s assessment of the effectiveness of the company’s internal control over financial reporting as of February 26, 2005, has been audited by KPMG LLP, an independent registered public accounting firm. Their report expresses an unqualified opinion on management’s assessment and on the effectiveness of the company’s internal control over financial reporting as of February 26, 2005.

May 6, 2005

Changes in Internal Control Over Financial Reporting

During the fiscal quarter ended February 26, 2005, there has been no change in the company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information called for by Item 10, as to compliance with Section 16(a) of the Securities Exchange Act of 1934, is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2005 Annual Meeting of Stockholders under the heading “Other Information—Section 16(a) Beneficial Ownership Reporting Compliance.” The information called for by Item 10, as to the audit committee and the audit committee financial expert, is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2005 Annual Meeting of Stockholders under the heading “Meetings of the Board of Directors and Committees of the Board—Audit Committee.” Certain information regarding executive officers and directors of the Registrant is set forth below.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table provides certain information concerning the executive officers of the company as of April 29, 2005.

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Index to Financial Statements

The term of office of each executive officer is from one annual meeting of the directors until the next annual meeting of directors or until a successor for each is elected. There are no arrangements or understandings between any of the executive officers of the company and any other person pursuant to which any of the executive officers were selected as an officer of the company. There are no family relationships between or among any of the executive officers of the company.

Each of the executive officers of the company has been in the employ of the company or its subsidiaries for more than five consecutive years, except for John H. Hooley, Roger E. Davidson and David M. Oliver.

Mr. Hooley was elected to his current position in April 2002. From November 2000 to April 2002, he was Senior Vice President and President and Chief Executive Officer, Cub Foods. From February 2000 to September 2000, he was Executive Vice President of Partner Alliances, 24K.com, a loyalty marketing company and affiliate of the Carlson Companies, Inc.

Mr. Davidson was elected to his current position in December 2004. From December 2003 to December 2004, he was Senior Vice President of Grocery Procurement, Merchandising, and Own Brand for H.E.B. Grocery, a food retailing company. From December 2000 to December 2003, he was Senior Vice President of Non-Perishables, Corporate Brands and Global Sourcing for Ahold USA, a food retailing company. From June 2000 to December 2000 he was Vice President of Grocery Procurement, Corporate Brands and Global Sourcing for Ahold USA. From September 1999 to April 2000, he was Vice President of Wholesale Strategies for the company.

Mr. Oliver was elected to his current position in April 2004. From November 1999 to April 2004, he was Chief Financial Officer, Arden Group, Inc., a holding company with supermarket operations in Southern California.

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DIRECTORS OF THE REGISTRANT

The following table provides certain information concerning the directors of the company as of April 29, 2005.

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The company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and all other employees and non-employee directors of the company. This code of ethics is posted on the company’s website (www.supervalu.com). The company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the code of ethics that applies to the company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on the company’s website, at the address specified above.

The company’s Corporate Governance Principles and charters for each Committee of its Board of Directors, are also available on the company’s website. The code of ethics, Corporate Governance Principles and charters are also available in print to any stockholder who submits a request to: SUPERVALU INC., P.O. Box 990, Minneapolis, Minnesota 55440.

Information on the company’s website is not deemed to be incorporated by reference into this Annual Report on Form 10-K.

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ITEM 11.    EXECUTIVE COMPENSATION

The information called for by Item 11 is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2005 Annual Meeting of Stockholders under the headings “Compensation of Directors,” “Compensation of Executive Officers” and “Change-in-Control Agreements.”

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information called for by Item 12 is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2005 Annual Meeting of Stockholders under the headings “Security Ownership of Certain Beneficial Owners,” “Security Ownership of Management” and “Proposal to Amend the SUPERVALU INC. 2002 Stock Plan (Item 3)—Equity Compensation Plan Information.”

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by Item 14 is incorporated by reference to the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the Registrant’s 2005 Annual Meeting of Stockholders under the heading “Independent Registered Public Accountants’ Fees.”

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Index to Financial Statements

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The consolidated financial statements of the Registrant listed in the accompanying “Index of Selected Financial Data and Financial Statements and Schedules” together with the report of KPMG LLP, independent registered public accountants, are filed as part of this report.

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Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of certain instruments defining the rights of holders of certain long-term debt of the Registrant and its subsidiaries are not filed and, in lieu thereof, the Registrant agrees to furnish copies thereof to the Securities and Exchange Commission upon request.

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Index to Financial Statements

33

Index to Financial Statements

34

Index to Financial Statements

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Index to Financial Statements

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

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Index to Financial Statements

Exhibit 31.1

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Jeffrey Noddle, certify that:

1. I have reviewed this annual report on Form 10-K of SUPERVALU INC. for the fiscal year ended February 26, 2005;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

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Index to Financial Statements

Exhibit 31.2

Certification Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Pamela K. Knous, certify that:

1. I have reviewed this annual report on Form 10-K of SUPERVALU INC. for the fiscal year ended February 26, 2005;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

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Index to Financial Statements

Exhibit 32.1

Certification Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of SUPERVALU INC. (the “company”) certifies that the annual report on Form 10-K of the company for the fiscal year ended February 26, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the company for the period and as of the dates covered thereby.

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Index to Financial Statements

Exhibit 32.2

Certification Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of SUPERVALU INC. (the “company”) certifies that the annual report on Form 10-K of the company for the fiscal year ended February 26, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the company for the period and as of the dates covered thereby.

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Index to Financial Statements

SUPERVALU INC.

Annual Report on Form 10-K

Items 6, 8 and 15(a)

Index of Selected Financial Data and Financial Statements and Schedules