The difference seems to be that Supervalu has almost entirely revamped its top management and appears poised to make some big changes in the company’s Sav-A-Lot stores. Safeway offered no such promise, even though the company reaffirmed its previous guidance.
What this means for Supervalu is that it is going to put up a fight in the discount space against the likes of Wal-Mart Stores Inc. (NYSE: WMT) and Family Dollar Stores Inc. (NYSE: FDO), where a lot of the growth has been in grocery sales. Whether or not it works is all a matter of execution and investment, and Supervalu has apparently persuaded at least some investors that the store means to play hardball.
Safeway, which has less than half as many stores as Supervalu, will continue to compete against the The Kroger Co. (NYSE: KR), The Fresh Market Inc. (NASDAQ: TFM), and Whole Foods Market Inc. (NASDAQ: WFM). These may not be fair fights. Kroger’s market cap is about three times Safeway’s and the chain has been on a roll. Whole Foods is even a bit larger than Kroger, and together with Fresh Market address the higher-end organic and specialty foods markets.
What are Safeway’s choices? Kroger, which reports earnings on May 7th, is expected to post EPS of $0.88 on revenues of $30.16 billion. That’s a $6 billion boost to last quarter’s revenues though the EPS estimate is flat. Safeway’s revenues were forecast to rise modestly in the first quarter and failed to do that.
Both Fresh Market and Whole Foods have much higher margins than Safeway, and discounters like Walmart and Family Dollar Stores offer low food prices as an enticement to attract more customers into the megastores.
Safeway’s stock collapse today is the result of either no announced plan to work itself out of the fix its in or a poorly communicated plan. Investors are free to wonder if management has even faced the issue and the result is that investors have found no reason to believe that Safeway is going to prosper, so what’s the point of holding the stock?
Shares are down nearly 17% in the early afternoon, at $23.52 in a 52-week range of $14.73 to $28.41. The stock fell as low as $22.90 earlier today.
Is Your Money Earning the Best Possible Rate? (Sponsor)
Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.
However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.
There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.