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SUPERVALU Inc. Message Board

  • pinkal1000 pinkal1000 Jun 1, 2012 2:37 PM Flag


    There is something wrong here. The mounting number of short shares. The value argument and the pace at which it is going down. Someone probably was right when they said that SVU management probably wants to go BK to get out of other obligations/unions, that way that would be justified. I am also thinking that they may improve all other operating numbers except pensions. The potential pension hole is so big that they dont even mention it. We just hear that it is a billion, but who knows the real number, what if it north of say 6 billion, does it still make this a value play here.

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    • If they were planning to go BK, whhy would they was $500m per year paying down debt? Silly.

      Let me just say this, something weird is going on, I completely agree with you. Yeah I get it, they have a very levered balance sheet, and sales are flat to shrinking marginally over time. OK, not wonderful, and the markets are tanking so levered companies are getting taken out and shot.

      But really, just because Europe is imploding, and the markets are selling off, how exactly does this impact SVU's business model? Are people really going to stop buying groceries because they are worried about the economy? Not really. Groceries are a necessity, and demand tends to be inelastic. One could argue that if the economy got really bad, people would start trading down and stop shopping at Whole Foods which is crazy expensive, and shop at Save-a-Lot, etc. instead. Is there risk that if there is a credit crunch, that SVU won't be able to roll their debt? No more risk than for any other company, and less so given that significant free cash flow that SVU generates each year (which they have consistently used to pay down debt). I don't see their dividend at risk again because of their huge free cash flow.

      Not sure what to say at this point, the stock just plummets into oblivion, following a pretty strong quarter for the company. If you can wait it out, I'd just stick it in a drawer and forget about it I guess, and some day wake up to a double or triple.

      usually levered companies are rewarded when they use cash flow to pay down debt, as the more debt they pay down (and eliminate interest expense), the faster earnings and cash flow increase in the future, even if revenues don't grow.

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