Why Harris Teeter Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Harris Teeter Supermarkets (NYSE: HTSI  ) jumped late in today's trading session, gaining as much as 10% after reports broke that the grocery chain is seeking a buyer.

So what: As first reported in The Wall Street Journal, the North Carolina-based chain is working with JPMorgan Chase on a potential sale, but Harris Teeter wouldn't comment on the matter. Shares were essentially flat during the session but then jumped at 3:41 p.m. ET, as the news broke. Harris Teeter stock had recently dropped after a disappointing earnings report, as profits missed expectations by 20% and revenue grew more slowly than expected. The previous quarter may have been a sign that it's becoming more difficult for Harris Teeter to grow earnings.

Now what: The details of the prospective sale are preliminary, so it's too early to speculate on the outcome or whether there are potential buyers, but the market generally cheers buyout proposals like these. The supermarket industry has been changing rapidly, as superstores such as Wal-Mart and Target and drugstores such as Walgreen expand their grocery section. Meanwhile, SUPERVALU recently reached an agreement with Cerebrus Capital Management to sell its Albertsons stores, and the industry appears to be tightening. Notably, Harris Teeter blamed the poor results in the fourth quarter on aggressive discounting from rivals. Perhaps a sale now would be in the best interest of shareholders.

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