) is scheduled to report second quarter fiscal 2014 earnings
after the market closes on Oct 17, 2013. Last quarter, Supervalu
posted a positive surprise of 250.0%.
Why a Likely Positive Surprise?
Our proven model shows that Supervalu is likely to beat
earnings because it has the right combination of two key
Positive Zacks ESP:
, which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is +10.0%. This is
meaningful and a leading indicator of a likely positive earnings
surprise for the shares.
Zacks Rank #1 (Strong Buy):
Supervalu carries a Zacks Rank #1 (Strong Buy). Note that stocks
with a Zacks Rank #1, #2 and #3 have a significantly higher
chance of beating earnings estimates. The sell rated stocks (#4
and #5) should never be considered going into an earnings
The combination of Supervalu's Zacks Rank #1 (Strong Buy) and
a positive ESP of +10.0% makes us confident of an earnings beat
on Oct 17.
What is Driving the Better-than-Expected
Supervalu's turnaround initiatives have helped reverse four
successive years of negative identical store sales and
re-positioned the company for growth. These are expected to drive
fiscal second quarter 2014 results as well.
The company is in the process of revamping its stores. The
company continues to focus on the 'fresh from farm' department in
Save-A-Lot stores as the category has reported decent sales in
the past. The fresh saw cut meat program organized in all the
Save-a-Lot stores also helped the company post better comps
during the first quarter of fiscal 2014. We expect this program
to boost second quarter sales too.
The company adopted a fair price plus promotion strategy in
fiscal 2013, which aims to lower the pricing of its products and
is expected to help the company gain market share in the longer
As part of the broad-based strategic alternatives, Supervalu
sold its Albertson's, Jewel-Osco, Acme, Shaw's and Star Market
chains in order to reduce loss in the coming quarters as well as
streamline its operations in order to focus on Save-A-Lot
discount stores and its smaller regional chains. The sale of
non-performing assets is expected to unlock the value of the
company's stock and increase focus on its core distribution
The company has also emphasized on cost reduction initiatives
that are expected to lower administrative and operational expense
by $250 million through fiscal 2014. In Mar 2013, the company
reduced 1100 positions in order to right-size the organization.
In Sep 2012, Supervalu closed 60 of its underperforming stores,
which is expected to generate $80 million-$90 million in savings
over three years.
Other Stocks to Consider
Here are some other companies in the retail sector that can be
considered as our model shows that they have the right
combination of elements to post an earnings beat this
), Earnings ESP of +2.59% and a Zacks Rank #1.
Dollar General Corp
), Earnings ESP of +1.41% and a Zacks Rank #2 (Buy).
Spartan Stores Inc.
), Earnings ESP of +2.00% and a Zacks Rank #2.
DOLLAR GENERAL (DG): Free Stock Analysis
DSW INC CL-A (DSW): Free Stock Analysis
SPARTAN STORES (SPTN): Free Stock Analysis
SUPERVALU INC (SVU): Free Stock Analysis
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