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SUPERVALU Inc. (SVU - Analyst Report) is geared to expand into untapped markets Recently, the company moved a step ahead in this regard.

The grocery retailer has started the conversion  (supplying Supervalu’s items from its distribution center to the Rainbow stores) of the first of the 18 Rainbow stores acquired on May 7.  

On May 7, 2014 SUPERVALU and a consortium of traders entered a deal to take over 18 Rainbow grocery stores, including 13 Rainbow pharmacies and 3 Rainbow liquor stores, in the Twin Cities. (Read: SUPERVALU Bids for Twin Cities Stores)

Four other Twin Cities-based independent grocery retailers — Jerry’s Enterprises, Haug Enterprises, Lund Food Holdings and Radermacher Enterprises — are also participating in the consortium.

Over the next two weeks, SUPERVALU along with its four Twin Cities-based independent retailers are expected to complete the conversion of all the 18 Rainbow stores. After the conversion, 10 Rainbow stores will be rebranded as CUB, 2 will become Byerly’s outlets (located in Eden Praire and Woodbury) and 6 will retain the name under different ownership (located in Minneapolis, Plymouth, Richfield, West St. Paul, Maplewood and St. Paul (Midway)). The 10 CUB Food outlets will be located in Chaska, Lakeville, Minneapolis Lagoon, Minneapolis Quarry, Plymouth, Roseville, St. Louis Park, St. Paul, Eagan and Oakdale.

CUB Foods is a combination of corporate-owned and franchised locations. Post-deal closure, CUB Foods will total 66 stores in the Twin Cities and 77 stores banner-wide.

Of the 18 stores, SUPERVALU will have full ownership in 3 CUB stores, majority ownership in two CUB stores, minority ownership in three CUB stores and 100.0% ownership in two Rainbow stores as well as 11 pharmacies.

Other Stocks to Consider

SUPERVALU carries a Zacks Rank #3 (Hold). Other stocks in the retail sector worth considering include Pinnacle Foods Inc. (PF - Snapshot Report), The Hain Celestial Group Inc. (HAIN - Analyst Report) and TreeHouse Foods Inc. (THS - Snapshot Report). While Hain Celestial and TreeHouse Foods sport a Zacks Rank #1 (Strong Buy), Pinnacle Foods carry a Zacks Rank #2 (Buy).

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