Supervalu (NYSE: SVU) is the second "empty-shoe box" play in a week. The first being Sunoco (NYSE: SUN). Normally, one wouldn't see two of these in a year, but these are not normal times for the U.S. economy.In general, analysts are cautious regarding Supervalu, arguing that a combination of acquisition integration pains (it bought 1,124 Albertson's grocery stores) and a competitive grocery store sector will lead to stagnant revenue for F2010, only partially offset by a 2-3% new square footage growth.
Analysts also expect SVU to open just four standard stores and 50-60 limited assortment stores, and complete about 90 major remodelings. On a 2,500 multi-format retail food store platform, that's certainly not stupendous growth.
Still, SVU is also a primary grocery supplier to roughly 2,200 stores in addition to its own retail chain, and that low-cost supply chain business should be enough to maintain share value until some semblance of growth (and normalcy) returns to the U.S. economy. This and the fact that SVU is ridiculously cheap -- with a p /e of 6 -- make SVU shares about as cheap as an empty shoe box. And as the legendary founder and owner of the New York Giants, the late Tim Mara, once said, "Even an empty shoe box is worth $500."
The First Call F2009 / F2010 EPS estimates for SVU are $2.79 / $2.60.
Stock Analysis: Supervalu is a moderate-risk stock. Consider buying a 25% position in SVU now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your SVU position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $7.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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