* Q1 adjusted EPS $0.14, handily tops estimate
* Sales fall 1.5 percent to $5.16 billion
* Shares spike 18 percent at midday
(Updates share move, adds Safeway results)
July 18 Supervalu Inc reported a
better-than-expected adjusted quarterly profit after the
significantly downsized supermarket operator slashed costs and
shed workers, sending its heavily-shorted shares soaring more
than 18 percent.
Supervalu's stock jumped $1.22 to $7.99 in midday trading on
the New York Stock Exchange. The exaggerated move appeared to be
a classic short squeeze as traders who bet against the stock
scrambled to cover their positions.
"This is a very highly shorted stock and it makes sense that
after a strong earnings report, these bearish speculators would
be rushing to close their positions," said Joe Bell, senior
equity analyst at Schaeffer's Investment Research.
More than 26 percent of Supervalu's shares outstanding are
shorted, Bell said. Based on Supervalu's average daily stock
volume, it would take nearly 10 days for the shorts to buy back
their positions, he said.
Rival Safeway Inc, which recently announced the sale
of its Canadian assets and spun off its Blackhawk gift card
unit, also reported results that topped Wall Street's view.
Shares in the operator of Safeway, Vons and Dominick's
stores jumped 6.3 percent to $26.20.
Short interest in Safeway's outstanding shares is 20 percent
versus just 2.3 percent for industry leader Kroger, according
to shortsqueeze.com. Average short interest is around 3 percent.
Supervalu, which recently sold nearly 900 supermarkets in a
$3.3 billion deal, has been slimming down its business to adjust
to its smaller size. It also had been losing customers to larger
rivals such as Kroger and Wal-Mart Stores Inc, which
sells more groceries than any other U.S. retailer.
Supervalu sold its Albertsons, Acme, Jewel-Osco, Shaw's and
Star Market stores, along with Osco and Sav-on in-store
pharmacies, in March to an investor group led by Cerberus
Capital Management LP.
Supervalu's net loss from continuing operations rose to $105
million, or 43 cents per share, in the first quarter ended June
15, from $18 million, or 8 cents per share, a year
However, excluding items the company earned 14 cents per
share. Analysts on average had expected a profit of 6 cents per
share on that basis, according to Thomson Reuters I/B/E/S.
The company said its gross margin improved to 13.8 percent
from 13.5 percent, helped by lower infrastructure costs.
Sales fell 1.5 percent to $5.16 billion, slightly below the
average market estimate of $5.17 billion, due to a drop in
(Reporting by Lisa Baertlein in Los Angeles, Doris Frankel in
Chicago and Maria Ajit Thomas in Bangalore; Editing by Saumyadeb
Chakrabarty, Maju Samuel, Nick Zieminski, Chris Reese and