Leading grocery chain Supervalu Inc. ( SVU )
stepped into the world of single serve coffee products through its
new Delight Single Serve UnCup. The new product will be available
in all of 1,100 of the company's retail stores starting September
2012.
Management claims the new single-serve UnCup pod to be
economically priced and is more environment friendly as they use
30% less weight compared to other leading brands. Moreover, these
pods are compatible with the Keurig Single Cup Brewers.
Supervalu presently offers coffee is offered in six flavors and
expects to expand the portfolio further. However, the single serve
coffee of the company will face tough competition from several
coffee giants such as Starbucks Corporation ( SBUX ),
The Kroger Company ( KR ) and
The J.M. Smucker Company ( SJM )
who offer single serve coffee product compatible with Keurig
brewers.
These new of brand building initiatives and innovations are
expected to boost Supervalu's second quarter fiscal 2013 sales. The
company delivered poor first quarter fiscal 2013 earnings per share
of 19 cents, sharply lower than the Zacks Consensus Estimate of 38
cents and the prior-year quarter earnings of 35 cents a
share.
The lower-than-expected results were due to the disappointing
same-store sales during the quarter coupled with disposition of
several fuel centers owned by the company.
Revamp Initiatives
The company has undertaken several initiatives like 'fair price
plus promotion strategy,' cost-reduction program, reduction of
capital expenditures and also decided to suspend the quarterly
dividend in order to be at par with its competitors, have financial
flexibility, and also to have a strong balance sheet.
The company also announced very recently that it will close down
60 underperforming stores by December 2012, including 38 in its
retail food reporting segment and 22 Save-A-Lot locations.
Our Recommendation
We currently have a Neutral recommendation on Supervalu. The stock
carries a Zacks #4 Rank (a short-term Sell rating).
Based in Eden Prairie, Minnesota Supervalu, runs its retail
operations under various banners, such as Albertsons, Save-A-Lot,
Shaw's Supermarkets, Jewel-Osco, Acme Markets, Shoppers Food &
Pharmacy, Cub Foods, Farm Fresh, Lucky, Shop 'n Save, Scott's, Star
Markets, Bristol Farms, bigg's, Hornbacher's, and Sunflower
Market.
KROGER CO (KR): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis
Report
SMUCKER JM (SJM): Free Stock Analysis Report
SUPERVALU INC (SVU): Free Stock Analysis Report
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