News

Major grocer looking for a buyer

July 27, 2012

SuperValu is for sale, but one analyst doesn't think its competitors will be in line to make a bid for the nation's third-largest supermarket chain. Instead, Dan Burrows of InvestorPlacs, predicts that Kroger and Safeway, which face similar price pressures as the struggling chain, will easily pick up SuperValu's market share without buying the company that operates the Albertsons, Jewel-Osco, Shaw's and Save-A-Lot brands. Although they've been lowering prices, sliding sales and profits aren't increasing.

The company reported that profit plunged 45 percent on a 4.7 percent slip in revenue, which caused SVU's earnings to come in 19 cents per share lower than Wall Street's estimate. The stock is down about 65 percent year-to-date, Burrow said.

"SuperValu is the poster child for the strains the supermarket business has been facing ever since the onslaught of the Great Recession," he writes. "Cash-strapped consumers have made the grocery business tougher than ever. Cheaper generic and store brands are where it's at, but those margin-busting low prices make it awfully hard to turn a decent profit."

It doesn't help that several dollar chains, including Dollar General, Dollar Tree and Family Dollar, are entering the grocery market.

"It is essential that we move even more aggressively to lower prices, and anticipate and respond to competitor actions," SuperValu CEO Craig Herkert said in a statement. "These are bold but necessary moves, which will position Supervalu for success in this increasingly competitive environment."

Supervalu has said that bankruptcy is not an option.

Read more about supermarkets.