COMPANY ANALYSIS PAPER
Table of Contents
Decisions on where and how to invest are always challenging. Many public companies provide suitable opportunities for investors. For the investor, success is defined by how the return on investment is viewed. An important benchmark to achievement of positive returns is to select investment options where there is a good potential for capital growth in share price; and where the firm’s share may be purchased at a low price and offloaded later at a higher price. One company that may provide investors such an opportunity is Supervalu, Inc. Supervalu is an Eden Prairie, Minnesota based retail supermarket chain that has experienced sharp drop in the value of their share over the past several years. The company has committed itself to a turn-around by replacing Wayne Sales with Sam Duncan as CEO. Duncan followed his appointment as CEO by shuffling the top management deck and bringing in a new president in charge of Save-A-Lot, the companies most important subsidiary. All this was done with the ultimate aim of speeding up the turnaround. The company is also trimming down with layoffs and selling some of its well known brand to investment group Cerberus Capital (Anderson, 2013).
2. Overview of Supervalu
Supervalu is an American retail giant. It has been in business for more than a century. With over 130,000 employees, it is the third largest food retail company in the United States (after Kroger and Safeway), and ranks number seventy five on the 2012 Fortune 500 list of America’s largest companies (Forbes, 2012). On June 2nd 2006, the company announced the purchase of Boise, Idaho based Albertsons, Inc and all of its 1,124 stores. The Supermarket News magazine’s ranking of “Top Wholesalers for 2008” put Supervalu at the very top of the list (Supermarket News, 2008). The company has been listed on the New York Stock Exchange since 1967. The company’s mission is served by operations consisting principally of grocery and pharmacy operations with a total of 2,432 stores with the firm also offering supply chain services for smaller retailers, serving over 4,300 retailers (Supervalu, 2012). The retail operations are supported by 22 distribution centers, and the wholesale distribution is supported by nine distribution centers, the latter of which also supply company owned stores. The company benefits from a solid level of diversification with a number of different brands targeting different markets, including Acme, Albertsons and Shop ‘n Save brands. The company owns 1,102 traditional food retail stores, as well as 397 hard discount stores trading under the Save-A-Lot brand name (Supervalu, 2012). In addition the company also licenses the Save-A-Lot brand to 935 independent operators. With what seems to be a successful operation, the company however still faces a number of uphill battles with the last three years reporting significant losses and extreme pressure from competitors. In 2012 CEO Craig Hackert in charge since 2009 was replaced by company chairman Wayne Sales. A move that saw a sharp drop in share prices was met eight months later with Sales’ own firing and replacement with newcomer Sam Duncan in January of this year with the aim of accelerating the company’s turnaround. There have been significant problems including massive losses and decline in revenue production. Measures are now being taken to limit losses, slash cost and regain sales, including the sale of non-profitable brands as well as a shakeup in top management as discussed earlier. However, issues such as high levels of debt, a low level of equity and difficult trading conditions may persist for some time. In order to assess the organization as a potential investment, it is necessary to look at the financial analysis. 3. Financial Analysis
Companies produce annual reports designed with the shareholder as the primary audience. The annual reports which are published using...
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