Supervalu called to action by activist investor

Supervalu Inc.’s (SVU) recent maneuvers have not been enough to satisfy Blackwells Capital, an activist investor that holds approximately a 3.6% stake in the grocery wholesaler. Yesterday, Blackwells sent a letter to Supervalu, demonstrating dissatisfaction with the company’s approach.

“In the letter, Blackwells expressed frustration with SVU’s stock performance, and identified opportunities to create value,” William Kirk, analyst at RBC Capital Markets, LLC said in a statement.

According to Kirk, Blackwells suggested that Supervalu unlock the value of SVU’s owned real estate, sell approximately 30% of SVU’s retail stores and use the remaining to roll out delivery and meal prep services, bring on board a permanent CFO and begin to pay dividend and commit to growing that dividend and put in place a share repurchase program.

“Operationally, in Marc Gross’ first 18 months as CEO, SVU wholesale has shined, with over $1 billion in annualized customer wins and two accretive deals,” said Kirk in his statement. “We believe the company is pursuing many of the strategic initiatives outlined in the letter.”

Kirk said that investors are not giving the proper due to the company for its assets owned, operational performance of wholesale or its opportunities with Unified Grocers, which the company acquired in June.

“Too much focus is being given to a retail division that is, admittedly under pressure,” Kirk said in the statement.

However, Supervalu reported a loss of $25 million for the fiscal second quarter after one-time charges, with identical-store sales down 3.5% in the quarter, including a 3.7% decline in customer counts partially offset by a 0.2% increase in basket size.

Based in Minneapolis, Supervalu’s spent much of 2017 targeting smaller distributors that may not be able to keep pace with customer needs.

“We are a consolidator,” said CEO Mark Gross while discussing the strategy at Goldman Sachs 24th annual Global Retailing Conference in September. “What’s driving the opportunities in our business is the customer looking for an ever-greater degree of product diversity.”

Supervalu currently operates via a network of more than 2,000 owned, franchised and affiliated stores across the United States.

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