Supervalu Investors Hungry For Change Under New CEO
23 Luglio 2009 - 10:11PM
Dow Jones News
After a shake-up in Supervalu Inc.'s (SVU) executive ranks,
investors hope to see a glimpse of the struggling grocery chain's
future when it reports fiscal first-quarter earnings Tuesday.
Analysts are speculating Supervalu may try to sell one of its
supermarket banners or other assets or make further management
changes as Chief Executive Craig Herkert settles into his new role.
Herkert, who brings a deep retail and merchandising background from
Wal-Mart Stores Inc. (WMT), assumed his new role in late May,
replacing Jeff Noddle, who had led the company since 2002 and came
out of its supply-chain business.
"They're hungry for change here," says Jefferies & Co.
supermarket analyst Scott Mushkin of investor attitude. Any early
signs of a turnaround, he said, could be a near-term catalyst for
shares, which are down almost 47% over the last year. In recent
trading, shares rose 27 cents, or 2%, to $13.84.
Selling assets could be difficult with a tight credit market,
but analysts think it could focus management's attention on fixing
its core supermarket banners. Proceeds from such moves could also
help retire a portion of a $8.5 billion debt load. Analysts have
tabbed Supervalu's discount chain Save-A-Lot, which has thrived in
the downturn, Shaw's and some West Coast stores as candidates for
sales.
"The better assets that Supervalu owns will clearly get more
money for them, but do they want to part with some of their better
assets?" Cannaccord Adams analyst Simeon Gutman said.
For his part, Herkert said in June that he will fully review all
company businesses and support functions, and will lay out his plan
for the company over the next several months.
A Supervalu spokeswoman declined to comment ahead of the
company's earnings.
In late June, Supervalu warned investors that its fiscal
first-quarter results would likely fall well-below analysts'
then-estimates and that identical store-sales would likely be down
3%. The chain has been aggressively lowering prices at its stores
to provide a better value for cash-strapped customers.
Thursday, two other supermarket operators, Safeway Inc. (SWY)
and Great Atlantic & Pacific Tea Co. (GAP), reported
second-quarter results showing identical-store sales suffering as a
result of price cuts to woo customers. Safeway lowered its
full-year earnings target once again, sending shares down 7.5% to
$18.44 in recent trading, while shares of Great Atlantic, which
operates A&P and Pathmark, rose 14% to $5.30, as it announced a
$115 million investment from Yucaipa Cos.
Supervalu's price cuts come as its stores, which operate under
Acme, Shaw's and Shop 'N Save names, lose share to chains like
Kroger Co. (KR) and Wal-Mart that offer lower prices, said
Mushkin.
The losses in market share are "rapid enough that if you
continue down this path, you're not going to have a company left,"
Mushkin said. Chicago figures to be a key market, he said, as
Supervalu's Jewel-Osco banner has cut prices up to 20% on thousands
of items, hoping to slow years of losing share to the likes of
Wal-Mart and Meijer Inc.
Analysts project Supervalu will report first-quarter earnings of
53 cents a share, according to Thomson Reuters estimates, down from
76 cents a year earlier. Revenue is projected to fall to $12.8
billion in the first quarter from $13.3 billion a year ago.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com