Supervalu still sucks
DSM Local

Ankeny, IA

#1 Jan 14, 2013
Supervalu Inc. made some big moves on Thursday, but one analyst says the grocer still has a lot of work to do before it turns around its long-term fortune.

"The problems that they had before, they still have, its just going to be on a smaller scale," David Livingston, a Waukesha, Wis.-based supermarket consultant, said in a phone interview. "They’re probably going to continue to see declines in same store sales."

Supervalu says it has a deal to sell five of its largest grocery chains for $3.3 billion to a group led by Cerberus Capital Management. It also named former OfficeMax CEO Sam Duncan as CEO.

>Click here to see several Minneapolis/St. Paul Business Journal stories about Supervalu's announcement of major changes, including the sale of five grocery brands and the hiring of a new CEO.

Even though Eden Prairie-based Supervalu (NYSE: SVU) is getting rid of a lot of debt, it isn’t going to be able to stop the competition like Target Corp.(NYSE: TGT) and Wal-Mart Stores Inc.(NYSE: WMT) from moving further into its territory, said Livingston, a former market research manager for Milwaukee-based supermarket chain Roundy’s who has run his own firm, DJL Research, since 2002.

"They’re going up against retailers that are just too big and too smart and too fast that have no debt, no union issues and no rent," he said. "They don’t have the kind of expenses that Supervalu is stuck with."

He predicted competitors would try to take bigger footprints in areas where Supervalu will continue to operate.

He said Supervalu's wholesale customers could also be spooked by the company's troubles, which could help competitors such as Edina-based Nash Finch Co.(Nasdaq: NAFC).

But to the extent that this deal helps to clean up the balance sheet for Supervalu and reduce the risk of a bankruptcy, it could help Supervalu retain independent store operators such as Lund Food Holdings.

"If I’m an independent retailer, I’m going to want to go with a very financially stable wholesaler," Livingston said.

Wall Street investors seem to have a different take on Thursday’s news of a sale. The company’s stock (NYSE: SUV) was trading up 13 percent, or about 41 cents, to $3.44 per share in mid-afternoon trading Thursday.

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