Billionaire Steve Cohen Thinks SUPERVALU INC. (SVU) Is Just That

We can compare Supervalu to The Kroger Co. (NYSE:KR), Safeway Inc. (NYSE:SWY), Weis Markets, Inc. (NYSE:WMK), and Harris Teeter Supermarkets Inc (NYSE:HTSI). Harris Teeter has been exploring strategic options, including a potential sale of the company, and so the trailing earnings multiple has risen to 22. The other three peers carry trailing P/Es in the 11-13 range. Interestingly, looking at the most recent quarter versus a year earlier, only Kroger delivered decent revenue growth but each of the other three peers reported double-digit growth rates on the bottom line. It’s possible that margins are beginning to come up a bit at grocery stores, and given that Kroger, Safeway, and Weis are in clear value territory it may be worth looking into the causes of this improvement in net margins to see if it is something which might continue going forward. Of these companies we’d note that Safeway is another popular short target, possibly because of its high leverage.

Dumping many of the assets in the struggling Retail Food business could be positive for Supervalu, as it should at least potentially bring the company to a place where its revenue and earnings grow over time. Still its earnings multiple is not particularly attractive compared to some grocery stores with good recent performance, and so those companies would seem to be better prospects to us.

Disclosure: I own no shares of any stocks mentioned in this article.