The Key to Growth for SUPERVALU Earnings

SUPERVALU (NYSE: SVU  ) will release its quarterly report on Thursday, and investors are increasingly optimistic that the grocery-store chain has finally turned the corner, and is poised for a rebound. Although the company is much smaller after having divested itself of several of its biggest chains, SUPERVALU nevertheless has the potential to remain profitable.

Hard-hit shareholders have been waiting for good times to come, after having dealt with consistent share-price losses and the suspension of SUPERVALU's dividend. Yet, the grocery industry has some promising prospects for growth. Let's take an early look at what's been happening with SUPERVALU over the past quarter, and what we're likely to see in its quarterly report.

Stats on SUPERVALU

Analyst EPS Estimate

$0.03

Change From Year-Ago EPS

(84%)

Revenue Estimate

$5.17 billion

Change From Year-Ago Revenue

(51%)

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance.

Will SUPERVALU earnings finally measure up?
Analysts have continued to ratchet down their views on SUPERVALU earnings in recent months, having slashed their May-quarter estimates by two-thirds, and cut their calls for the current fiscal year almost in half. But the stock has been oblivious to those concerns, rising 28% since early April.

SUPERVALU has impressed investors lately with its turnaround story. With the company having sold off its Albertsons, Jewel-Osco, Acme, Shaw's, and Star Market chains to Cerberus Capital last quarter, new CEO Sam Duncan gave a strong message that SUPERVALU intends to cut back on its cost structure to reflect its new smaller size. Investors cheered favorable prospects for the company's Save-A-Lot discount chain by bidding shares upward after the company's previous quarterly report in April.

One interesting battle that's playing out in the grocery industry is the collection of purchase data through loyalty cards. SUPERVALU and Kroger (NYSE: KR  ) have both tried to flesh out and expand their loyalty systems in order to hold off competition from non-traditional competitors like big-box retail stores, and Safeway (NYSE: SWY  ) CEO Steve Burd said earlier this year that its shelf-pricing will be "irrelevant because we can be so personalized in what we offer people." Yet, taking the other side of the issue, in light of recent privacy concerns, former SUPERVALU chain Albertsons recently made the decision to drop its loyalty-card program, arguing that all it really needs is to track store-level sales rather than customer-specific purchases.

Still, SUPERVALU faces two major threats. One is the impact that healthy-food-focused Whole Foods has had on the industry, with its huge profit margins putting SUPERVALU and its peers to shame. Kroger has done a good job of using a combination of organic offerings and private-label branding to keep margins up, but in the midst of its strategic shifts, SUPERVALU arguably has too much on its plate to consider shaking up its product lineup, as well.

In SUPERVALU's earnings report, watch for the company to report on the status of its cost-cutting measures, and to explain how it intends to move forward with new initiatives to improve its competitive position. Unless the company can demonstrate its ability to grow, then all the gains in its stock could disappear quickly.

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