SUPERVALU INC. (SVU): Will A Much Smaller Company Boost Profits?

Obviously, the move will lead to much smaller sales figures for SUPERVALU going forward. But the company will still face threats from both ends of the grocery spectrum. On one hand, Whole Foods Market, Inc. (NASDAQ:WFM) has captured substantial business from SUPERVALU INC. (NYSE:SVU) and its traditional grocery peers, with its reputation for high-quality healthy fare. On the other, deep-discount chain Dollar Tree, Inc. (NASDAQ:DLTR) and its peers have increasingly turned to grocery offerings to lure customers. Save-A-Lot is designed to help counter that trend, but thus far, its year-to-date sales have been flat, compared to double-digit growth for Dollar Tree, Inc. (NASDAQ:DLTR).

In response, SUPERVALU has started paring workers, announcing 1,100 job cuts in late March. The move should help cut costs and slim the company down in light of its reduced business scope.

In SUPERVALU INC. (NYSE:SVU)’s quarterly report, watch closely to see how the company plots its strategy going forward. Beyond simply letting the Cerberus deal speak for itself, SUPERVALU should proactively explain where it sees its best prospects and how it plans to make the most of them. Without strong leadership, the gains that SUPERVALU’s stock has seen could prove short-lived.

The article Will a Much Smaller SUPERVALU Boost Profits? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends and owns Whole Foods Market. It owns shares of SUPERVALU.

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