Turnaround on Hold at SUPERVALU... Buyout As Well?

SUPERVALU Inc. (NYSE: SVU) had recently been the beneficiary of some buyout rumors.  It seemed unlikely with its balance sheet and losses, but the rumor mill often is full of all sorts of rumors which might not ever be real or even possible.  The hope of a buyout and a turnaround may have just died even though a review of alternatives was announced.

The company’s shares are getting pounded after the company said that cash flow from operations was $227 million and net earnings of $41 million or $0.19 per share.  The company also said that it is accelerating its price investments and intensifying its cost reduction plan to reach an additional $250 million in administrative and operational expense reductions over the next two years.  While it is looking to increase its 2013 debt reduction range to about $450 million to $500 million, the company said that it is suspending its dividend and starting a review of strategic alternatives.

The strategic alternatives announcement is as follows: SUPERVALU and its financial advisors of Goldman Sachs and Greenhill & Co. have initiated a review of strategic alternatives to create value for the Company’s shareholders.  On the other side of the coin, a disappointing move was handed to analysts now.  SUPERVALU said that it is suspending identical store sales and earnings per share guidance and withdrawing any previous guidance given for fiscal 2013.

SUPERVALU shares closed up 2.7% at $5.29 against a 52-week range of $4.05 to $9.44, but the stock is down about 20% at $4.17 in the after-hours trading session.

JON C. OGG