Struggling supermarket chain Supervalu Inc. (NYSE: SVU) on Monday named a new chief executive as part of its effort to revive a business plagued by a three-year sales slump. Current chairman Wayne Sales was named CEO, replacing Craig Herkert, who came on board in May 2009 from Wal-Mart Stores Inc. (NYSE: WMT). Supervalu shares have retreated about 88% while Herkert held the reins.
The question is whether this is the prelude to a buyout or an implosion.
Supervalu said earlier this month it was weighing its options, including selling the supermarket chain. Understanding who would be willing to acquire this company is difficult because of the high debt load — about $6 billion, compared to a market cap near $430 million.
The stock was pounded following the most recent quarterly report that offered earnings of $41 million or $0.19 per share. That was about half the EPS expected by analysts. The company also said that it is suspending its dividend, as well as withdrawing all guidance for fiscal 2013. A number of analysts downgraded the stock, and shares reached a new multiyear low of $1.68 last week.
“We will prove the naysayers wrong,” said Sales in a letter to Supervalu employees that outlined a plan to improve sales, reduce costs and build on its “strong legacy of serving independent retailers.” It offered no concrete plans.
Shares were up more than 2% following the announcement Monday morning, at one point all the way to $2.09 per share. That’s still well off the 52-week high of $8.94, and even the mean price target of analyst of $5.00.