Supervalu Inc.SVU

Morningstar Rating

Stock Research and Analysis

by Michelle Chang, CFA

Supermarkets have felt some pain from the downturn in the economy, but SUPERVALU has been particularly hit hard as it remains in the middle of a sizable integration and is more leveraged than its peers. Because the firm isn't positioned well to deal Read more

Bulls Say

Combining the highest-performing Albertsons regions with SUPERVALU's supply-chain backbone has created a retail grocery chain with strong regional brands and significant economies of scale.

Thus far, the company managed the integration process without any notable hiccups, and the integration should essentially be finished this fiscal year.

Remodeling stores, centralizing important functions like merchandising and marketing, and investing in technology should enable SUPERVALU to improve store offerings and better understand its customers.

Save-A-Lot is the largest limited-assortment chain and stands to benefit from consumers seeking value in a difficult economy. Save-A-Lot offers low price points through an edited assortment of mostly private-label offerings in a no-frills shopping environment. Read more

Bears Say

Being one of the largest supermarket chains doesn't shield SUPERVALU from continuing competitive pressures of growing supercenters, warehouse clubs, and other alternative food retailers.

SUPERVALU has demonstrated recently that it is not immune from a cautious consumer backdrop. Identical-store sales performance has been worsening, and the firm is now more aggressively lowering prices and increasing promotions.

The company is years behind large peers, such as Kroger and Safeway, in developing an effective, centralized marketing and merchandising function, and its identical-store sales have been worse than those firms'.

Grocery distribution, which accounts for about 20% of SUPERVALU's total sales, is a diminishing business. The overall market is estimated to decline 2%-4% annually in the foreseeable future. Read more

Strategy

SUPERVALU has transformed itself from a mixture of grocery distribution and retail stores to primarily a grocery retailer with strong share positions in selected markets. The firm believes its foundation Read more

Management

SUPERVALU recently announced the appointment of Craig Herkert to replace CEO Jeff Noddle. Noddle will remain on the board as executive chairman for at least one year. Herkert comes to SUPERVALU from its largest competitor, Wal-Mart, where he served Read more

Profile

SUPERVALU operates in two segments, primarily in the grocery sector: retail and supply-chain services. Through its retail operations, which account for about 80% of annual Read more

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