Grocery chain Supervalu pressured by activist investor to sell stores

A woman loads her groceries to her car at the Shoppers supermarket in Olney, Maryland. Shoppers supermarket is part of the SuperValu network of stores.

Gary Cameron | Reuters
A woman loads her groceries to her car at the Shoppers supermarket in Olney, Maryland. Shoppers supermarket is part of the SuperValu network of stores.

In the aftermath of Amazon buying Whole Foods, Minnesota-based grocery chain Supervalu is facing escalating pressure from an activist investor.

Blackwells Capital, which owns a little less than 4 percent of Supervalu’s common stock and is one of the company’s 10 largest shareholders, issued a letter Thursday morning calling out a “lack of clear steps” at the

Jason Aintabi, a managing partner at Blackwells, said he’s especially “frustrated” with Supervalu’s dismal share performance of late. Ten years ago, the grocer’s stock was trading above $320 a share. On Wednesday, shares closed below $16 apiece, and are down more than 50 percent in 2017.

A representative from Supervalu didn’t immediately respond to CNBC’s request for comment on Blackwells’ letter to the board.

Blackwells said it’s been attracted to Superavlu because of the chain’s vast real estate holdings, which include stores and distribution centers. Aintabi has urged the company to “change direction and guide management” to a better strategic plan.

The four initiatives Blackwells has suggested Supervalu consider include selling some of the grocer’s more than 17 million square feet of owned real estate, which is “worth multiples of the current capitalization of the Company,” according to Aintabi.

The activist investor is asking Supervalu to sell roughly 30 percent of its stores, and to use the remaining locations for completing tasks like home delivery and meal prep.

Further, Blackwells wants a “refresh” of leadership with grocery expertise, a dividend paid to shareholders, and a share buyback plan.

“Supervalu’s leadership has demonstrated a willingness to take in order to unlock value and position the Company for ongoing success,” Aintabi wrote.

“In an industry under pressure, Supervalu has tremendous structural advantages and an opportunity to define, and act upon, a corporate strategy that can create long-term shareholder value,” he added. “Without active and immediate change, we believe the opportunity will be lost and shareholders will continue to pay the price.”

Blackwells is seeking to immediately meet with Supervalu’s board and discuss its proposal.

It’s tough to be a grocer

This isn’t the first time a major U.S. grocery chain has faced pressure from outsiders.

Activist hedge fund Jana Partners first reported its ownership of Texas-based Whole Foods in April. At the time, Jana was suggesting the struggling grocer should either accelerate its turnaround plans or consider putting itself up for sale.

Whole Foods Chief Executive John Mackey proceed to attack Jana, tagging them “greedy bastards” who were only interested in making money from a forced sale of the company.

In the wake of the Amazon-Whole Foods deal, though, Jana cashed outof its position in the chain entirely.

KrogerSprouts Farmers Market, Albertsons and Ahold Delhaize are a few grocery companies — in addition to Supervalu — that are trying to adapt as some shoppers shift their spending online, and competition increases from both high- and low-end players.

German-based Aldi and Lidl, both discount chains, are seen opening stores at a rapid clip nationwide.

Just last week, Supervalu reported a 3.5 percent decline in second-quarter comparable sales for its retail division, as the grocer’s revenue fell for the tenth consecutive period.

“Industry changes continue to make headlines as consumer’s shopping habits evolve and convenience gets redefined,” Chief Executive Mark Gross said on a call with analysts and investors.

“We’ll continue to evaluate our assets including owned real estate, underperforming retail stores, as well as our distribution center network so that we maximize value,” Gross added on the call.

“We know that the industrial real estate market is attractive and are evaluating ways to potentially take advantage of this, recognizing the need to maintain financial and operational flexibility,” he said.

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