After a 49 percent plunge in its stock price on July 12, the survival of grocery giant Supervalu grew further in doubt. The plummet in share value occurred the day after the company, which owns the Albertsons, Jewel-Osco and Save-A-Lot, reported dismal first-quarter results, suspended its dividend and announced plans to potentially put itself up for sale.
Analysts believe that itâ€™s unlikely that Supervalu will find a buyer because of its high debt, $6.3 billion as of June 16, according to the Associated Press. Furthermore, investors will probably shy away from the low-growth supermarket industry.
"Supervalu could become the next casualty in the troubled supermarket space, as its fundamentals have finally begun to show real signs of distress," wrote Credit Suisse analyst Edward Kelly, adding that the business "may be beyond repair at this point."
Supervalu is one of Minnesota's largest companies, with 3,000 employees in the state and 130,000 full-time workers nationwide. Besides Cub Foods in the Twin Cities, it owns a number of supermarket brands that include Jewel-Osco in Chicago, Albertson's in the western U.S. and Save-A-Lot hard-discount stores.
Supervalu has been working for several years to revive slumping sales, AP reported. In 2006, the company purchased Albertson's, giving it a coast-to-coast presence, but also saddling it with a massive debtload. The recession followed quickly, bringing with it new low-cost competitors.
To stay afloat, Supervalu has been selling assets, announcing layoffs and squeezing wherever it could. Despite those efforts, the company has been unable to keep up with intense price competition.
Fitch, one of three major credit-rating agencies, Thursday downgraded Supervalu's debt from B to CCC, one step above default. Fitch also suggested Supervalu's most likely future will be chopping it apart and selling off the pieces.
After the 49 percent drop in its stock price, Supervalu shares were valued at $2.69. As of July 17, the shares were worth $2.32.