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SUPERVALU Inc. Message Board

  • gilley0139 gilley0139 Jul 14, 2012 12:32 AM Flag

    This is a black box


    This investment is a black box now. Your fate will be determined by management, which has been incapable of improved results in the past, and vulture capitalists like Goldman Sachs, that really don't give a darn about individual investors. We are sheeps to the slaughter in their view.

    I don't see management caring that much about the current shareholders. The recent announcements are a great example. There was no reason to put a scare in the market like they did. They must have known the stock would plummet, yet they did it anyway. Yes, they have to make hard decisions, but there were much better ways of communicating that to the market.

    Simply put, I don't trust management or the vulture capitalists to protect shareholder interests.

    More importantly, SVU is dealing with a declining industry. Of course food sales will remain steady overall, but you have so many strong competitors entering the market that SVU's share is bound to drop. Target and Walmart have tons of capital, and they are expanding like crazy. They view the groceries as a huge growth area because it creates synergies with their other departments. Worse yet, they view groceries as a loss leader. If they can sell groceries at break even or even a slight loss, they'll more than make it up on increased sales in other departments. For example, does Target really thing they'll make money selling produce? Of course not. They do it to further establish themselves as a one-stop shop.

    Then you have Costco, which is stealing the core grocery shopping from everybody. Everybody goes to Costco to buy the bulk items on the cheap, then they use others stores to fill in. Very few people buy most of their food at neighborhood grocery stores any more.

    Then you have the Walgreens and other drug stores selling food. This attacks SVU on the neighborhood grocery front. If you just want an item or two, why not go to corner Walgreens or CVS and pick up your perscription at the same time.

    All in all, it's a crappy business to be in, and competition shows no signs of slowing.

    Then you have the shrinking middle class. It seems these days there are rich people and poor people. The rich go to Whole Paycheck and the upper end grocery stores. The poor go to Dollar Store, Walmart, Costco, etc. The businesses catering to the middle class in all industries are dying a slow death.

    I simply don't see anything to reverse these trends.

    To drastically alter their plan, like they announced, requires lots of capital and leaves no room for even modest failure. Chances for success on their own are very slim.

    The only hope is a buyout, but I don't see vulture capitalists doing anything but a takeunder here. They are not the generous types. If you think something is worth $1, they'll tell its worth $.10, and if you don't have the leverage to go it on your own, what options do you really have?

    Someone in the traditional grocery business has to die so that Target and Walmart can continue their endless investment plans, supported by gobbs of capital and synergies. I don't think it's going to be Kroger.

    This topic is deleted.
4.56-0.01(-0.22%)Sep 28 4:03 PMEDT