Supervalu Getting Short Squeezed

Apr 10, 2012
J. Webster
Comments Off on Supervalu Getting Short Squeezed

Guidance, guidance, and more guidance, that’s all it takes to move a stock even if they lose money in the quarter. Oh yeah, it helps if the shorts like the stock too. That’s what happened to shares of Supervalu (SVU), as the company lost money on weaker same store sales but they reported a better outlook for the rest of the year. The stock is heavily shorted and so it’s shooting higher as the shorts rush to buy back shares.

Supervalu swung to a fiscal fourth-quarter loss as the supermarket operator contended with weak same-store sales, store closings and the sale of fuel centers. Shares rose 15% to $6.12 premarket as Supervalu projected current year earnings above what analysts’ were expecting. Adjusted earnings for the latest period also topped expectations. (WSJ)

The stock traded at a new 52 week low of $5 a share just a few days ago. Today it’s soared as high as $6.20 a share.

Supervalu kept hitting new 52 week lows because there was talk the company was going to go bankrupt. What’s interesting about the stock is it has nearly a 6% dividend yield. Are they going to be able to maintain this dividend or will it be cut? You’d think it would be slashed right away, if the bankruptcy rumblings have any validity.

Supervalu is made up of these grocery stores: Acme, Albertsons, Cub Foods, Farm Fresh, Hornbacher’s, Jewel-Osco, Lucky, Shaw’s, Shop ’n Save, Shoppers Food & Pharmacy and Star Market banners.

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