SUPERVALU Completes Divestment Of Save-A-Lot Business

SUPERVALU Inc. (NYSE:SVU) has completed the divestment of its Save-A-Lot business to private equity firm Onex for $1.365 billion in cash. SUPERVALU had announced its intention to spin off Save-a-Lot stores a year ago during its first-quarter fiscal 2016 earnings conference call.

The sale of the business segment will allow SUPERVALU to concentrate more on its core segments that are profitable. Further, it aids the company get rid of the business which has not been performing up to the level recently.

Shares of Shares of this supermarket retailer have declined 3% since Oct 4, when the company found Onex as the bidder for the sell-off. The price performance was better than the Zacks categorized Food/Miscellaneous Diversified industry, which declined by 5.8% during the period.

SUPERVALU has used $750 million of the net proceeds from the sale to prepay a portion of its outstanding term loan balance. The company intends to use the remaining net sale proceeds to reduce debt and improve its capital structure. Further, it wants to contribute the proceeds to its pension plan, as well as fund corporate and growth initiatives.

The grocery retailer has been recently suffering from lower-than-expected sales in the Retail and Save-A-Lot segments. Higher competition in the grocery business as well as a challenging sales and retail environment led to the decline in sales.

Besides, the grocery supermarket chain has been grappling with the prevailing crisis in grocery retail business for quite sometime now. The Save-A-Lot segment in particular has been plagued due to the deflationary environment as well as an unfavorable year-over-year comparisons.

Zacks Rank & Key Picks

SUPERVALU carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader consumer staples sector include Inter Parfums Inc. (NASDAQ:IPAR) , Sanderson Farms Inc. (NASDAQ:SAFM) and Sysco Corporation (NYSE:SYY) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inter Parfums Inc. has an expected earnings growth of 15%. Sanderson Farms has an expected earnings growth rate of 5%, while Sysco Corporation has a long-term growth rate of 8.83%.

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