Supervalu shares fall to all-time low

[July 13, 2012]  NEW YORK (AP) -- Shares of Supervalu shed nearly half their value, falling to an all-time on Thursday after the grocery store chain reported dismal first-quarter results and said it is considering options for the business, which may include putting itself up for sale.

Analysts said the steps the company is now taking to improve -- refinancing its debt, cutting prices -- could be a case of too little, too late.

"Desperate times call for desperate measures . finally," said Jefferies analyst Scott Mushkin. "For more than two years, we have suggested that Supervalu's board take more aggressive actions, which the company's flailing business finally brought to bear."

Shares fell $2.41, or 46 percent, to $2.88 in morning trading. The stock had already been down 35 percent since the beginning of the year. Its previous all-time low was $4.05, reached on June 11.

Late Wednesday, Supervalu, which owns Albertsons, Jewel-Osco, Save-A-Lot and other grocery chains, said net income fell 45 percent in the first quarter. Supervalu lost revenue from selling off gas stations, and tough competition is hurting its business.

Grocery store chains increasingly compete on price, and Supervalu's stores have lagged on that front. It's also facing competition from retail behemoths Wal-Mart Stores Inc. and Target Corp., which have expanded their grocery store offerings.

For now, Supervalu has suspended its dividend and is trying to gain some financial breathing room by refinancing its debt. The savings it gets from doing that will help it "wage a multi-front price war" against rivals including Kroger Co. and Safeway Inc., Mushkin said.

But analysts are wary. With competition growing more intense, it will take a while for Supervalu to benefit from cutting prices, said Citi analyst Deborah Weinswig. The company is shifting into "survival mode," according to Cantor Fitzgerald analyst Ajay Jain, and changes to stores may not win it many new customers.

JPMorgan analyst Ken Goldman agreed. He said that previously, there were two reasons to own the stock: The possibility of turning around results, and the potential for a breakup of the business that could add value to the company. But those two possibilities seem less likely now, he said. Competitors have nimbly stepped up price competition and the turnaround is taking longer than first expected.

He downgraded the stock to "Neutral" From "Overweight."

Supervalu may not be done making changes. The company also said Wednesday that it is reviewing various options for the business. This type of review traditionally includes the possibility of selling the company.

[Associated Press]

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