Here's What You Should Know About Supervalu-Instacart Deal
Supervalu Inc. SVU has inked a reseller deal with Instacart to provide its retailers with the facility of online shopping and delivery services. The option will be available to more than 3,000 independent retail stores that are catered by Supervalu. Also, these services will be open to other U.S. retailers, spanning in more than 240 metro areas where Instacart operates.
Supervalu’s digital marketing services, along with Instacart’s e-commerce platform (which entails limited capital expenditure) will help its retailers expand their customer base without any additional labor cost. Also, the deal with Instacart, is likely to offer Supervalu’s retailers benefits like contracted pricing, marketing skills and placement on Instacart.com.
Given the increasing needs of consumers, Instacart comes with the advantage of same-day grocery delivery or in-store pickup services, which will further boost Supervalu’s e-commerce operations. This looks like one of the strategic efforts undertaken by the company to improve performance of its retail business.
Well, this Zacks Rank #5 (Strong Sell) company has been grappling with softness in retail segment for a while now, owing to stiff competition, price competition and intense promotions. Notably, during the fourth-quarter of fiscal 2018, net sales in retail dropped 0.6% to $690 million, due to store closures partially offset by a 0.1% gain in identical store sales. Also, adjusted operating margin in the segment declined year over year as a result of lower base margins and increased shrink costs.
These issues have compelled the company to adhere to store closures and streamline retail operations, significantly. Earlier this month, Supervalu unveiled a proposal (the “Holding Company Proposal”) to rearrange its corporate structure into a holding company setup. SUPERVALU took this initiative to organize and make further distinctions between its wholesale and retail operations, in a planned and more efficient way. The company also plans to segregate its liabilities into respective wholesale and retail segments.
Let’s see if such initiatives can help revive Supervalu’s stock that has dipped 2% in the past year, while the industry declined 12.2%.
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