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How Supervalu’s Profitability Compares to Peers

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Top line could continue to contract in 3Q17

As discussed, Supervalu’s (SVU) top line and bottom line have contracted over the past several quarters. The company reported a net loss of $11 million from continuing operations in 3Q17. Both the retail and the wholesale divisions reported a fall in operating profits, which drove the net loss.

After adjusting for certain one-time charges, third quarter net earnings (from continuing operations) stood at $14 million, or $0.05 per diluted share. For the fourth quarter, Wall Street is predicting a net profit of $25 million or $0.09 per share. 

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Comparing SVU’s profitability to peers

Supervalu has the lowest margins among the supermarket peer group. The company’s trailing-12-month operating margin of 1.9% is lower than that of Kroger (KR) at 2.9%, Whole Foods Market (WFM) at 5%, and Sprouts Farmers Market (SFM) at 5.3%.

A look at the recent performances of supermarket peers

Most of Supervalu’s grocery sector peers have seen muted performances in their recent quarters. Kroger reported a 7% drop in EPS in its fourth quarter results in early March.

Organic and natural food retailers Whole Foods Market (WFM) and Sprouts Farmers Market (SFM) also reported an earnings decline of 15% and 28% YoY, respectively, in their last reported quarters.

ETF investors seeking to add exposure to SVU can consider the iShares Morningstar Small-Cap Value ETF (JKL), which invests 0.2% of its portfolio in the company.

Read the next section to know about the company’s stock market performance, current valuations, and Wall Street’s view.

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