Safeway Inc. (SWY), The Kroger Co. (KR): This Grocer Is Heading in the Right Direction

The Kroger Co. (NYSE:KR) is also buying upscale chain Harris Teeter Supermarkets Inc (NYSE:HTSI) in a deal worth $2.44 billion in order to expand its reach in the Southeast and Mid-Atlantic U.S. This is being touted as biggest takeover bid by Kroger since 1998, when it bought Fred Meyer for $12 billion. This deal would give the Cincinnati-based retailer 212 fairly new stores that wouldn’t need any remodeling, expanding its presence in more markets.

SUPERVALU INC. (NYSE:SVU) has done well after selling off a number of its store brands. The company recently sold close to 900 assets as a part of restructuring exercise, for a value of $3.3 billion. This has enabled it to achieve diminished infrastructure costs and allows Supervalu to focus more effectively on a leaner business. A lower cost structure and simplified business model as a result of divestment has also helped it revive its margins.

Looking forward, SUPERVALU INC. (NYSE:SVU) is focusing on various moves like better merchandise arrangement and weekly newspaper inserts to push sales higher. But the stock has run up more than 200% this year, so investors should tread cautiously and look for more signs of a turnaround.

Conclusion

Safeway Inc. (NYSE:SWY) has done really well this year, and it can do even better in the future. As the company is looking to focus on its core business, it should perform more efficiently. And with a trailing P/E ratio of just 12 (lower than both The Kroger Co. (NYSE:KR) and Wal-Mart) and a juicy dividend yield of 3.2%, investors should think of adding this stock to their portfolio.

The article This Grocer Is Heading in the Right Direction originally appeared on Fool.com.

ANUP SINGH has no position in any stocks mentioned. The Motley Fool owns shares of Supervalu. 

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