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Andersons Announces its Decision to Exit Retail Business

Zacks Equity Research

The Andersons, Inc. ANDE recently declared its intention to exit its long underperforming retail business, including the remaining four retail stores, in the second quarter of 2017.

Considering that the retail group incurred loss of more than $20 million in the past eight years, it was difficult for the company to keep operating its stores. Prior to this announcement, Andersons had already closed three stores. Andersons’ retail group currently has two stores in the Toledo area and two in Columbus. These stores comprise traditional groceries, specialty wine and beer, fresh fruits, vegetables, and meats, clothing, tools and hardware items, lawn and garden equipments, fertilizers, plants, automotive supplies, household items like furniture, towels, lighting, and pets and pet supplies.

The store closures will eliminate approximately 650 jobs in the Toledo area and about 400 positions in Columbus. The company would provide employees with severance packages and job-placement assistance. No other details were divulged.

The Andersons, Inc. Price

 

The Andersons, Inc. Price | The Andersons, Inc. Quote

The closure will have no impact on Andersons’ grain, ethanol, plant nutrient and rail operations. However, the company expects pre-tax impairment charges on long-lived assets related to the segment of approximately $6.5 million in the fourth quarter of 2016. It also estimates a pre-tax charge in the range of $9–$14 million in the first half of 2017. The full financial impact of this closure has not been calculated as yet.

Andersons believes that the full carrying value of its inventory may not be recoverable during the store closures. Though the company expects gains or losses on individual properties upon sale, the timing and amount of those sales have not been determined.

Shares of Andersons outperformed the Zacks categorized Agriculture/Products industry in the past one year. The outperformance was supported by the company’s focus on leveraging its distribution base and pursuing an increased mix of specialty product sales. The stock gained 43.3%, whereas the industry’s improved by 14.2% over the same time frame.

 

We expect the momentum to be maintained as exit of the loss making retail group will remove an overhang on the stock.

Zacks Rank & Key Picks

Andersons currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector include AK Steel Holding Corporation AKS, The Chemours Company CC and Daqo New Energy Corp. DQ.

AK Steel Holding sports a Zacks Rank #1 (Strong Buy) and has an impressive track record of earnings surprise with an average positive earnings surprise of 170.80% for the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Chemours Company also boasts a Zacks Rank #1 and has an average earnings surprise of 153.83% for the trailing four quarters.

Daqo New Energy, another Zacks Rank #1 stock, has an average positive earnings surprise of 112.94% for the past four quarters.

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