Reuters: Global Markets: Supervalu cost-cutting bears fruit, stock soars

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Supervalu cost-cutting bears fruit, stock soars Jul 18th 2013, 14:40 Thu Jul 18, 2013 10:40am EDT (Reuters) - Supervalu Inc (SVU.N) reported a better-than-expected adjusted quarterly profit after the significantly downsized supermarket operator slashed costs and shed workers, sending its heavily-shorted shares soaring more than 17 percent. Supervalu's stock jumped $1.16 to $7.93 in early trading on the New York Stock Exchange. The exaggerated move appeared to be a classic short squeeze as traders who bet against the stock scrambled to cover their positions. "This is a very highly shorted stock and it makes sense that after a strong earnings report, these bearish speculators would be rushing to close their positions," said Joe Bell, senior equity analyst at Schaeffer's Investment Research. More than 26 percent of Supervalu's shares outstanding are shorted, Bell said. Based on Supervalu's average daily stock volume, it would take nearly 10 days for the shorts to buy back their positions, he said. For comparison, just 2.3 percent industry leader Kroger Co's (KR.N) float is held short, according to shortsqueeze.com. Supervalu, which recently sold nearly 900 supermarkets in a $3.3 billion deal, has been slimming down its business to adjust to its smaller size. It also had been losing customers to larger rivals such as Kroger and Wal-Mart Stores Inc (WMT.N), which sells more groceries than any other U.S. retailer. Supervalu sold its Albertsons, Acme, Jewel-Osco, Shaw's and Star Market stores, along with Osco and Sav-on in-store pharmacies, in March to an investor group led by Cerberus Capital Management LP CBS.UL. Supervalu's net loss from continuing operations rose to $105 million, or 43 cents per share, in the first quarter ended June 15, from $18 million, or 8 cents per share, a year earlier. However, excluding items the company earned 14 cents per share. Analysts on average had expected a profit of 6 cents per share on that basis, according to Thomson Reuters I/B/E/S. The company said its gross margin improved to 13.8 percent from 13.5 percent, helped by lower infrastructure costs. Sales fell 1.5 percent to $5.16 billion, slightly below the average market estimate of $5.17 billion, due to a drop in same-store sales. (Reporting by Lisa Baertlein in Los Angeles, Doris Frankel in Chicago and Maria Ajit Thomas in Bangalore; Editing by Saumyadeb Chakrabarty, Maju Samuel and Nick Zieminski) Link this Share this Digg this Email Reprints

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