Canaccord Genuity Morning Coffee on Supervalu (SVU): True To Its Name
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Price: $32.49 --0%
Rating Summary:
1 Buy, 15 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
1 Buy, 15 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Canaccord Genuity Morning Coffee on Supervalu (NYSE: SVU): True to its name.
Canaccord analyst says, "The grocery giant could be on the verge of a big turnaround, so said Barron’s on Sunday, which observed the company is now generating positive cash flow after selling off some units and cutting costs. Even after capital spending, which has amounted to $700 million annually in recent years, Barron’s noted that Supervalu has been generating healthy cashflows, allowing it to pay down its debtload by some $1.7 billion to a more reasonable $7.1 billion. This cash generation is the result of management’s moving to sell several non-strategic units, dispose 100 underperforming stores in the past year, and crop the corporate payroll by 10%. Overhead costs have dropped from $8.7 billion in the year before CEO Craig Herkert took over, to $7.6 billion. Aside from robust cashflows, Barron’s thinks investors are overlooking several existing strengths in Supervalu’s portfolio of operations that should prevent it from becoming another “industry death star” like A&P, which filed for bankruptcy last December. One is Supervalu’s wholesale-grocery business, the largest in the U.S., which contributes about a third of Supervalu’s operating earnings, or some $300 million a year, and is largely impervious to price competition from the discounters. Moreover, Supervalu is investing heavily in the Save-A-Lot chain of discount stores that are increasingly set up in densely populated metropolitan areas largely beyond the reach of big discounters like Wal-Mart (NYSE: WMT). “These stores keep prices down by offering lots of private-label goods and limited brand selection while at the same time providing low-income customers with an assortment of fresh items like produce, meat and dairy that the neighborhood establishments may not carry,” one company insider told Barron’s. “The chain caters to the fastest-growing cohort in the U.S. population—the households making $45,000 or less, and frequently on food stamps.” All told, Barron’s thinks Supervalu shares look “undeniably cheap” at recent price levels. It noted that analysts expect earnings of $1.29 a share for the fiscal year ended February, with a dip in the earlier consensus profits for the current fiscal year to $1.19. The latter number translates into a price/earnings ratio of 6.6, compared with a much greater 11.3 for rival Safeway (NYSE: SWY), and 11.1 for Kroger (NYSE: KR)."
Canaccord analyst says, "The grocery giant could be on the verge of a big turnaround, so said Barron’s on Sunday, which observed the company is now generating positive cash flow after selling off some units and cutting costs. Even after capital spending, which has amounted to $700 million annually in recent years, Barron’s noted that Supervalu has been generating healthy cashflows, allowing it to pay down its debtload by some $1.7 billion to a more reasonable $7.1 billion. This cash generation is the result of management’s moving to sell several non-strategic units, dispose 100 underperforming stores in the past year, and crop the corporate payroll by 10%. Overhead costs have dropped from $8.7 billion in the year before CEO Craig Herkert took over, to $7.6 billion. Aside from robust cashflows, Barron’s thinks investors are overlooking several existing strengths in Supervalu’s portfolio of operations that should prevent it from becoming another “industry death star” like A&P, which filed for bankruptcy last December. One is Supervalu’s wholesale-grocery business, the largest in the U.S., which contributes about a third of Supervalu’s operating earnings, or some $300 million a year, and is largely impervious to price competition from the discounters. Moreover, Supervalu is investing heavily in the Save-A-Lot chain of discount stores that are increasingly set up in densely populated metropolitan areas largely beyond the reach of big discounters like Wal-Mart (NYSE: WMT). “These stores keep prices down by offering lots of private-label goods and limited brand selection while at the same time providing low-income customers with an assortment of fresh items like produce, meat and dairy that the neighborhood establishments may not carry,” one company insider told Barron’s. “The chain caters to the fastest-growing cohort in the U.S. population—the households making $45,000 or less, and frequently on food stamps.” All told, Barron’s thinks Supervalu shares look “undeniably cheap” at recent price levels. It noted that analysts expect earnings of $1.29 a share for the fiscal year ended February, with a dip in the earlier consensus profits for the current fiscal year to $1.19. The latter number translates into a price/earnings ratio of 6.6, compared with a much greater 11.3 for rival Safeway (NYSE: SWY), and 11.1 for Kroger (NYSE: KR)."
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