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U.S.-based Supervalu – Changes regarding its pricing structure



U.S.-based Supervalu, which owns Albertsons, Jewel-Osco, Save-A-Lot and other grocery chains, reported late Wednesday that it will make sweeping changes regarding its pricing structure. The move was prompted by a dismal first quarter. The company will suspend dividends and is now reviewing its strategic alternatives.

The Minneapolis-based company had already lowered prices at some of its stores to attract new customers as part of a multi-year effort. The company let it be known that it will intensify these efforts. It now aims to revisit prices at half of its stores. Supervalu Inc. is thus making an aggressive attempt to win back customers who switched, largely due to the price change.

Supervalu’s actions are also having a negative impact on the overall grocery market in the U.S. said JP Morgan analyst Ken Goldman. The faster Supervalu cuts prices, the faster its competitors will either lose share or match the price and lose margin. Goldman said it appears likely that the industry especially Safeway in Chicago, where SVU will adjust prices downward now will face tougher times in the near future.

Safeway Inc. shares fell nearly 10 percent to $16.26 by midday. And shares of Kroger Co, the nation’s largest traditional grocery chain, fell 4 percent to $21.88.

Supervalu fared the worst, with shares falling more than 45 percent to $2.90 by noon, a record low for the company. The stock had already lost nearly 90 percent of its value in the past five years.

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