A new low-price strategy at Supervalu Inc., the parent of Jewel-Osco, may not help the grocery chain in either the short term or the long term because of intense competition within the supermarket industry, according to analysts at Fitch Ratings.
Analysts at the firm said the company's moves may not be enough because they will weaken company sales and profit margins. Also, it noted that better capitalized retailers like Wal-Mart Stores and Safeway Inc., parent of Dominick's, also are lowering — or will lower — their prices in response to Supervalu in markets where they compete head-to-head.
Analysts also said they believes Supervalu's operating results will continue to weaken, and "a complete sale of the business is unlikely." A sale of its Sav-A-Lot chain, Fitch said, is more likely.
"Certain markets where (Supervalu) enjoys a strong market share, such as Chicago and Minneapolis, could be attractive at the right price to a strategic buyer," analysts also noted.
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