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SUPERVALU (SVU) Shares Rising on Possible Save-a-Lot Bid

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SUPERVALU Inc. (SVU - Free Report) , the grocery supermarket chain, has been grappling with prevailing crisis in the grocery retail business for quite sometime now, but finally there seems to be light at the end of the tunnel. Supervalu, which intends to spin off its Save-a-Lot stores, has got itself a bidder, as per reports by Reuters on Sep 29. The share price of Eden Prairie, MN-based SUPERVALU has soared almost 11.08% over the past five days on the news.

As per Reuters, a private equity firm Onex is interested in buying the Save-A-Lot stores from the grocery retailer. The discount chain has been valued at $1.8 billion. SUPERVALU is expected to reach a decision regarding the divesture of the chain within the next two weeks.

SUPERVALU had announced its intention to spin off Save-a-Lot stores a year ago during its first-quarter fiscal 2016 earnings conference call. Although the discount retail chain had been one of the best performing units of the company in the past, it has not been performing well of late. Moreover, a spin-off will allow the company concentrate on its more profitable core businesses.

The grocery retailer has been recently suffering from lower-than-expected sales in the Retail and Save-A-Lot segments. Higher competition in the grocery business as well as a challenging sales and retail environment led to the decline in sales in the retail business of the company. Additionally, the Save-A-Lot segment is suffering due to a deflationary environment as well as unfavorable year-over-year comparisons. The cumulative effect of these factors is anticipated to affect the top line negatively in second-half fiscal 2017. The company also expects the comparable sales in the second quarter to be lower than the first quarter.

Zacks Rank & Key Picks

SUPERVALU currently carries a Zacks Rank #4 (Sell). Nonetheless, one can count on better-ranked stocks like The Chefs' Warehouse, Inc. (CHEF - Free Report) , The Kraft Heinz Co. (KHC - Free Report) and Ingredion Inc. (INGR - Free Report) .

The Chef’s Warehouse has a long-term earnings growth rate of 12.5% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Kraft Heinz Co has a long-term growth rate of 19.5%, while Ingredion Inc. has a long-term growth rate of 11%. Both these stocks carry a Zacks Rank #2 as well.

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