We reaffirm our Neutral recommendation on
) following an assessment of its third quarter fiscal 2013
Why the Reiteration?
Supervalu reported its third-quarter results on Jan 11, 2013.
Both earnings and sales missed the Zacks Consensus Estimates. The
company's earnings lagged the prior-year earnings due to the
disappointing same store sales during the quarter and reduced
discretionary spending by consumers in the U.S. due to ongoing
The company has reported negative identical store sales
successively for the past four years. The trend has continued in
the first half of fiscal 2013 as well.
Moreover, high inflation has proved to be a challenge for
several financially fragile customers. Therefore, as a hard
discount store, Supervalu could not increase prices to match the
cost of inputs and thus its margins were crippled.
However, Supervalu has embarked on turnaround initiatives and
has taken several cost reduction measures to improve its margins.
The fair price strategy of the company that aims to reduce the
price of its products to a competitive level is also expected to
boost sales in the long term.
Supervalu has entered into a definitive agreement to sell 877
supermarkets grouped under five supermarket chains to Cerberus
Capital Management LP. The sellout of these
underperforming-performing stores is expected to improve its
margins in the future.
Currently, Supervalu has a Zacks Rank #3 (Hold). Investments
to consider include
The Jeronimo Martins
Koninklijke Ahold N.V. (
all of which carry a Zacks Rank #2 (Buy).
AHOLD N V ADR (AHONY): Free Stock Analysis
JERONIMO MARTIN (JRONY): Get Free Report
SUPERVALU INC (SVU): Free Stock Analysis
SAFEWAY INC (SWY): Free Stock Analysis Report
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