Why SUPERVALU Inc. Stock Dropped 34% Last Year

What happened

Shares of SUPERVALU Inc. (NYSE: SVU) were losing value last year as the diversified supermarket operator continued to see sales fall in its retail division and was challenged by increased competition in the sector as Amazon.com acquired Whole Foods, European discounters Aldi and Lidl expanded, and Wal-Mart and Kroger have been ramping up their grocery pickup programs.

As a result, Supervalu stock fell 34% last year according to data from S&P Global Market Intelligence. As the chart below shows, the stock declined steadily over the course of the year.

So what

Supervalu got off on the wrong foot in January as the stock fell 12% over a two-day period -- the company posted weaker results than expected in its third-quarter earnings report. Adjusted for a reverse split later in the year, it turned in an adjusted earnings per share of $0.35, short of estimates at $0.93. Comparable sales in its retail division dropped 5.7%, while wholesale revenue was up just 0.2% to $1.91 billion.

The stock traded mostly sideways for the next several months and then tanked again in June, along with the rest of the supermarket industry, after Amazon announced it was acquiring Whole Foods Market. As one of the weaker competitors in the industry, and a supplier of vulnerable independent grocers, Supervalu took the news worse than most.

The company announced a 1-for-7 reverse stock split in July, generally a sign of weakness, and surged briefly after a better-than-expected third-quarter earnings report at the end of that month. Finally, the stock plunged in October after it offered disappointing guidance and announced the acquisition of Association Grocers of Florida, furthering its pivot into wholesale.

Now what

Supervalu's bets on wholesale with the acquisition of AG of Florida and Unified Grocers earlier in the year makes sense as the company's retail division continues to struggle with comparable sales falling 3.5% in its most recent quarter. The stock recovered some of its losses since the October report as the company announced a partnership with Instacart and benefited from bullish reports from peers like Wal-Mart, Kroger, and Costco. Supervalu will report earnings on Wednesday, which is likely to move the stock, but with modest guidance and a $1.6 billion debt burden, hopes for a comeback should be restrained.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Kroger. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.