SUPERVALU INC. (SVU): Remind Me Again, Why Would Anyone Own This Stock?

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In addition to the company’s sales struggles, their margins are also terrible. Overall, SUPERVALU INC. (NYSE:SVU)’s gross margin was just 14.1% in the current quarter. By comparison, The Kroger Co. (NYSE:KR)’s gross margin was 20.92%, Wal-Mart Stores, Inc. (NYSE:WMT) came in at 24.66%, and Safeway managed 26.70%. As you can see, not only is Supervalu losing sales, but they also make less on the sales they get.

It Gets Worse

I don’t see a reason for investors to stick around to see if Supervalu can get moving in the right direction. The company pays no dividend, and they aren’t buying back shares. Considering that Kroger, Safeway Inc. (NYSE:SWY), and Wal-Mart Stores, Inc. (NYSE:WMT) all pay dividends, and they all retired at least 3% of their shares in the last year, they offer much better values to investors.

In addition, Supervalu’s transaction to sell its retail food companies could have led to a much better balance sheet. However, the company still carries nearly $2.9 billion in long-term debt, yet they have a market cap of just $1.6 billion.

Analysts also have the most negative opinion of Supervalu when it comes to earnings growth. The average analyst expects negative earnings growth from Supervalu versus 6.73% growth at Safeway, 7.3% growth at Kroger, and 9.29% growth at Wal-Mart.

With SUPERVALU INC. (NYSE:SVU), you get a company that is losing sales, has terrible margins, pays no yield, isn’t buying back shares, and has a boatload of long-term debt. Remind me again why anyone would consider owning this stock?

The article Remind Me Again, Why Would Anyone Own This Stock? originally appeared on Fool.com and is written by Chad Henage.

Chad Henage has no position in any stocks mentioned. The Motley Fool owns shares of Supervalu. Chad is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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