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SUPERVALU's CFO to Bid Adieu: How Will This Impact Stock?

Zacks Equity Research

SUPERVALU Inc. SVU recently announced that Bruce Besanko is going to step down from his position as the Chief Operating Officer and Chief Financial Officer effective Jul 5, 2017.  The company informed that Besanko, who served the company for four years, would be resigning so as to undertake opportunities outside the firm. However, there are no intimations regarding where Besanko is headed to.

The company informed that David Johnson and Rob Woseth would function as the Interim Chief Financial Officer and Interim Chief Accounting Officer, respectively, for the time being until a permanent Chief Financial Officer gets appointed. Rob Woseth is the Executive Vice President and Chief Strategy Officer at SUPERVALU, while David Johnson is the company’s Vice President.

On the event of Besanko’s departure from the company, Mark Gross, the Chief Executive Officer and President of SUPERVALU has acknowledged the former’s contributions. Mark Gross particularly thanked Bruce Besanko for improving SUPERVALU’s capital structure which would act as the groundwork for future transformations.

Over the last couple of years, the company has been focusing stringently on increasing operating efficiency. Additionally. the company has been focusing on high margin products categories, expanding retail banners and enhancing wholesale business.

The resignation of Besanko may be considered unwelcoming, especially at a time when SUPERVALU has fallen from investors’ good books. We noted that the stock has underperformed the Zacks categorized Food-Miscellaneous Diversified industry in the past one year. The company’s shares plunged 30% compared to the industry’s decline of 5%, during the said time frame. Besanko’s resignation may further raise apprehensions among investors.

For quite some time now the company has been witnessing sluggish sales in its retail business, primarily due to lower traffic, price competition and ongoing deflation. Further, the spin-off of Save-A-Lot discount stores during fiscal 2017 for reducing debt burden and improving capital structure  indicates that the financial position of the company is not quite sound. Although, SUPERVALU has been taking several measures to improve its operational and financial performance, including the acquisition of Unified Grocers, it is yet to come up with a sturdy strategy for achieving radical growth.

Zacks Rank & Key Picks

SUPERVALU currently holds a Zacks Rank #3 (Hold). However, for now investors can focus on better-ranked stocks in the consumer staples space such as, McCormick & Company, Incorporated MKC, MGP Ingredients, Inc. MGPI and Aramark ARMK all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McCormick & Company has an average positive earnings surprise of 3.1% over the trailing four quarters and a long-term earnings growth rate of 8.8%.

MGP Ingredients has an average positive earnings surprise of 27% over the trailing four quarters and a long-term earnings growth rate of 15%.

Aramark has an average positive earnings surprise of 4.5% over the trailing four quarters and a long-term earnings growth rate of 12%.

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