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SUPERVALU Grappling with Headwinds: Should You Hold?
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Grocery retailer SUPERVALU Inc. seems to be in a state of doldrums at the moment. Shares of the company have plunged 28.2% on a year-to-date basis, underperforming the Zacks categorized Food-Miscellaneous/Diversified industry, which has showcased a gain of 6.1%. Competitive pressure, deflationary conditions and soft sales in the Retail and wholesale segments are the main reasons that are irking the stock.
What’s going on with this Zacks Rank #3 (Hold) consumer staples stock? Let’s find out.
Growth Drivers
SUPERVALU is set to expand its existing customer base. It has inked supply agreement with retailers like Fresh Market Inc., American Foods Basket and Marsh Supermarkets under which it will distribute traditional products such as meat, deli, bakery, seafood, grocery, frozen foods and dairy. These initiatives will help the company boost its top-line. Further, it is focused on improving its eCommerce platform and is upgrading the digital platform. Its newly launched click-and-collect option allows it to expand the home delivery service into larger markets.
The company has also completed the divestment of its underperforming Save-A-Lot business to private equity firm Onex for $1.365 billion in cash. The sale of the business segment will allow SUPERVALU to concentrate more on its core segments that are profitable.
However Concerns Remain
SUPERVALU is bearing the brunt of tough competitive pressure that has hit the grocery industry as traditional grocery rivals are strengthening their franchises while outside players are offering alternative outlets for food and other staples. Customers are becoming more receptive to purchasing private label products as a lower cost alternative to national brands.
The company expects the trend to continue in the near term. Moreover, as more companies are entering into the fray as well as expanding their presence, it is becoming tough for the existing players like SUPERVALU to retain their market share.
Inter Parfums Inc. has an expected earnings growth of 15%. Mondelez has an expected earnings growth rate of 13.1%, while Sysco Corporation has a long-term growth rate of 8.8%.
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SUPERVALU Grappling with Headwinds: Should You Hold?
Grocery retailer SUPERVALU Inc. seems to be in a state of doldrums at the moment. Shares of the company have plunged 28.2% on a year-to-date basis, underperforming the Zacks categorized Food-Miscellaneous/Diversified industry, which has showcased a gain of 6.1%. Competitive pressure, deflationary conditions and soft sales in the Retail and wholesale segments are the main reasons that are irking the stock.
What’s going on with this Zacks Rank #3 (Hold) consumer staples stock? Let’s find out.
Growth Drivers
SUPERVALU is set to expand its existing customer base. It has inked supply agreement with retailers like Fresh Market Inc., American Foods Basket and Marsh Supermarkets under which it will distribute traditional products such as meat, deli, bakery, seafood, grocery, frozen foods and dairy. These initiatives will help the company boost its top-line. Further, it is focused on improving its eCommerce platform and is upgrading the digital platform. Its newly launched click-and-collect option allows it to expand the home delivery service into larger markets.
The company has also completed the divestment of its underperforming Save-A-Lot business to private equity firm Onex for $1.365 billion in cash. The sale of the business segment will allow SUPERVALU to concentrate more on its core segments that are profitable.
However Concerns Remain
SUPERVALU is bearing the brunt of tough competitive pressure that has hit the grocery industry as traditional grocery rivals are strengthening their franchises while outside players are offering alternative outlets for food and other staples. Customers are becoming more receptive to purchasing private label products as a lower cost alternative to national brands.
The company expects the trend to continue in the near term. Moreover, as more companies are entering into the fray as well as expanding their presence, it is becoming tough for the existing players like SUPERVALU to retain their market share.
SUPERVALU INC Price, Consensus and EPS Surprise
SUPERVALU INC Price, Consensus and EPS Surprise | SUPERVALU INC Quote
Additionally, SUPERVALU has been reporting soft sales in the Retail segment for the past few quarters mainly due to lower comps.
Further, deflationary environment in food products and depleting footfalls at the supermarkets are causes of concern for the grocery chain.
Other Stock Picks
Some better-ranked stocks in the broader consumer staples sector include Inter Parfums Inc. (IPAR - Free Report) , Mondelez International Inc. (MDLZ - Free Report) and Sysco Corp. (SYY - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inter Parfums Inc. has an expected earnings growth of 15%. Mondelez has an expected earnings growth rate of 13.1%, while Sysco Corporation has a long-term growth rate of 8.8%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>