Continue Reading Below
Shares of SuperValu Inc. (NYSE: SVU) had a rough start to the year, falling 10.1% according to data provided by S&P Global Market Intelligence, driven by an earnings report that didn't impress investors.
Fiscal third quarter revenue fell slightly to $3.0 billion, and the company swung from net income of $34 million a year ago to a loss of $26 million. This continues the long deterioration of SuperValu's business. Management can't seem to find a way to grow the top line or expand the bottom line.
Image source: Getty Images.
Retail continues to struggle, with same store sales down 5.7% in the quarter. Wholesale was slightly better, showing 0.2% growth, but operating earnings were down $2 million versus a year ago to $52 million, so even the strongest business segment is seeing pressure.
Continue Reading Below
The one recent positive was the sale of Save-A-Lot, which management said will result in a $1.1 billion reduction in debt and less retail exposure. That helps reduce risk in the business, but doesn't overshadow the fact that continuing operations still lost money last quarter. And given competitive pressure, there's not a lot of hope for improvement in the near future.
The grocery business has changed rapidly in the last decade. Customers have moved to more natural, organic options, discount retailers have grown, and eating out has increased. Those work against SuperValu's wholesale and retail businesses, and they're the reasons you see weak financial results. The problem is that market pressures aren't getting any weaker, and SuperValu doesn't have an easy strategic transition to make to improve the business. That's why the stock is falling and may continue to fall in 2017.
10 stocks we like better than SuperValu
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and SuperValu wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of January 4, 2017