Supervalu Inc., the third-biggest U.S. supermarket chain, said profit-denting price cuts failed to lure back lost customers and its shares fell more than 14 percent.

The company said in October that it was preparing new price cuts to win back customers lost to rivals like Kroger Co. and Safeway Inc. The promotions did not work as expected, Chief Executive Officer Craig Herkert said.

"Our performance is still not close to my expectations," he said in a statement.

As a result, the Minneapolis-based operator of Albertsons, Jewel-Osco and Save-A-Lot grocery stores reported quarterly profit excluding items below Wall Street's view and again cut its full-year profit forecast. It also expects sales at its existing stores to fall even more than previously expected.

"It's clear fundamentals continue to deteriorate faster than management expected." Credit Suisse analyst Edward Kelly said in a client note. "(The) stock should clearly be down on these results."

Supervalu now sees earnings for the fiscal year ending in February 2011, excluding non-cash charges, of $1.25 to $1.35 per share. In October, the company cut its full-year forecast to a range of $1.40 to $1.60 per share — a level many on Wall Street considered conservative.

Many retailers, from dollar stores and drug stores to Wal-Mart Stores Inc, have been taking a bite out of supermarkets' share of grocery spending.

In the past few years, high U.S. unemployment and a weak economy stoked price competition, which has cut industry profits and left little room for error.

Shares of Supervalu plunged 14.3 percent to $7.36 in morning trading on the New York Stock Exchange. Kroger's shares fell 1.7 percent and Safeway's shares declined 2.9 percent.

REVENUE, MARGINS DECLINE

Supervalu reported a quarterly net loss of $202 million, or 95 cents per share, compared with a profit last year of $109 million, or 51 cents per share.

Excluding charges, the company earned $50 million, or 24 cents per share. On an adjusted basis, analysts were expecting 31 cents per share, according to Thomson Reuters I/B/E/S.

Gross margin fell to 21.5 percent from 22.4 percent last year, reflecting the increased spending on promotions.

Revenue fell 5.9 percent to $8.67 billion.

Identical-store sales, a gauge of supermarket performance, fell 4.9 percent, which was well under the company's plan, Herkert said during a conference call.

At Supervalu, identical-store sales include results from outlets operating for four full quarters, including store expansions and excluding fuel sales.

Supervalu cut its 2011 forecast for identical-store sales to a decline of 6 percent, versus its previous call for a decline of 5.5 percent.