Grocery retailer, SUPERVALU Inc. has been in troubled waters for the past one year due to tough competitive pressure, deflationary environment in the food industry and soft sales in the retail segment. The company’s shares have declined 23% in the past one year, underperforming the Zacks categorized Food-Miscellaneous Diversified industry’s decline of 1% in the same time frame. However, the company has undertaken several initiatives to post a turnaround.
In order to combat declining sales at the retail segment, the company has plans to expand retail banners. Sales declined 3%, 5% and 1.4% for the first, second and third quarters of fiscal 2016, respectively. SUPERVALU is geared to rebrand most of its retail banners in order to create a unique clearly-defined identity for each of the brands, communicated through in-store signage, weekly ads, customer emails, mobile devices and banner web pages. Further, the company has developed the store-within-a-store concept to expand offerings and started offering home delivery through the Instacart app.
SUPERVALU spun off its underperforming business Save-A-Lot to private equity firm Onex Corporation in Jan 2017. The spin-off allows the company to concentrate on more profitable core businesses and fund several other turnaround initiatives.
However, the company continues to face tough competitive pressure that has hit the grocery industry as a whole. Traditional grocery rivals are strengthening their franchises, while outside players are offering alternative outlets for food and other staples. Moreover, customers are becoming more receptive to purchasing private label products as a low cost alternative to national brands.
To retain market share amid this competitive pressure, SUPERVALU has taken initiatives to expand its customer base. This is evident from its supply agreement with retailers such as 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. It is better to wait and see if these initiatives help the Zacks Rank #3 (Hold) stock to post a turnaround in the near future.
Stocks to Consider
Some better-ranked stocks in the broader consumer staples sector include Sysco Corporation (SYY - Free Report) , Tyson Foods Inc. (TSN - Free Report) and Pinnacle Foods Company , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sysco Corporation has an expected long-term earnings growth rate of 8.6%. Tyson Foods has an expected growth rate of 11%, while Pinnacle Foods has a growth rate of 6.5%.
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