United Natural Foods, Inc. (UNFI - Free Report) recently announced that the newly-acquired subsidiary — SUPERVALU INC — will divest Hornbacher's store locations to Coborn’s Inc. Per the definitive agreement, Coborn’s will acquire seven Hornbacher's locations and a new store that is currently being developed in West Fargo. We believe that such a move is in line with United Natural’s efforts to rationalize SUPERVALU’s retail operations, which continues to struggle. Let’s take a closer look at the latest move.
Per the deal, SUPERVALU will continue to be the primary supplier of Hornbacher's store locations. Further, SUPERVALU, which shares a long-standing business relationship with Coborn's, intends to expand the supply relation further. The deal, which is expected to conclude prior to the end of December, is in sync with management’s efforts to find a buyer for SUPERVALU’s retail operations with sustained supply opportunities.
We note that, SUPERVALU is on track with cutting down retail operations for quite a while, due to persistent softness in the category. In September, the company inked a deal with Schnuck Markets, Inc to sell 19 Shop ‘n Save grocery stores. Previously, the subsidiary completed the sale of the Farm Fresh banner to companies like Harris Teeter, Kroger (KR - Free Report) and Food Lion.
That said, we expect that the latest move to sell Hornbacher's locations will be a step to reduce reliance on SUPERVALU’s sluggish retail operations and increase focus on profitable areas like wholesale.
Such endeavors to rationalize SUPERVALU’s operations are likely to enhance the performance of United Natural. Notably, the company concluded SUPERVALU’s buyout in October. Apart from boosting presence in the grocery space, SUPERVALU’s takeover is expected to aid United Natural in becoming a leading food wholesaler with massive reach, scale and assortments. Also, Haddon House, Gourmet Guru and Nor-Cal Produce are some of the other renowned buyouts, which have helped United Natural to strengthen the portfolio. Notably, the company currently carries a Zacks Rank #2 (Buy).
Such well-chalked efforts are likely to boost the stock that has plunged 38.5% in the past three months compared with the industry’s 2.7% fall.
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