Why SUPERVALU Shares Surged
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: SUPERVALU were soaring again today, climbing as much as 19% after the company reported better-than-expected earnings this morning.
So what: The struggling supermarket chain posted an adjusted earnings per share of $0.14, well ahead of estimates at $0.06, evidence that its cost-cutting strategy seems to be paying off. In March, the company sold off over 900 stores under several banners, and laid off 1,100 workers following the sale. The desperately needed restructuring caused the company to lose more than half of its revenue, but after adjusting for discontinued operations, sales were down only 1.5% to $5.16 billion, slightly below estimates.
Now what: The jump in SUPERVALU shares seemed to be at least partly motivated by a short squeeze as 26% of shares were held short before the earnings announcement. The supermarket chain's stock is now up nearly 500% since bottoming out last October, but there are still reasons to be concerned. Same-store sales were down 3% and 1.9% for the Retail Food and Save-A-Lot segments, respectively; the chain is also facing increasing competition from big-box retailers like Wal-Mart and Target and continues to run cash flow negative. If earnings continue to grow, shares should keep moving higher, but there are plenty of risks to watch out for, here.
SUPERVALU may not be the strongest retailer out there, but there are a handful of companies who are rewriting the rules in the consumer-facing space. Find out which of these forward-looking companies are set to thrive in The Motley Fool's special report: "3 Companies Ready to Rule Retail." Uncovering these top picks is free today; just click here to read more.
The article Why SUPERVALU Shares Surged originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of SUPERVALU. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.