Supervalu (SVU) Could Be a Super Value -Barron's

This weekend's Barron's highlighted reasons to own Supervalu (NYSE: SVU), the third-largest supermarket chain in the U.S.

Hit by the economic slowdown in the U.S., Supervalu stock has fallen about 30% from its price in May of '07 and about 11% year-to-date. Barron's, however, believes that concerns about the health of the U.S. consumer seem to be overdone for the retailer. As shares of Supervalu are trading at "just 10.5x earnings", Barron's feels the stock is undervalued.

Besides valuation, Barron's also likes Supervalu as it is actively trying to increase value for shareholders: initiatives by management have helped Supervalu expand its operating margins from 2.6% last year to 3.3% this year. The company also expects to scale back debt by about $400 million this year, while at the same time offering a 2% dividend yield and stock buyback to investors.

Barron's also believes Supervalu should benefit from consumers using their stimulus package tax-rebate checks at Supervalu stores. To promote this possibility, Supervalu is offering an extra $30 to customers who redeem their government checks for Supervalu gift cards.

The article mentions that Supervalu management is expecting top-line growth of about 2-3% over FY09 (CY08) and hoping for growth of 3% in FY10.

SUPERVALU, INC. operates as a grocery retailer in the United States. [BCS]

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