Albertsons IPO left waiting — again
This article is part of a series of coverage of SN's annual Financial Analysts Roundtable, which on Sept. 19 brought together a prestigious group of industry experts to discuss the financial state of the food retailing industry.
Analysts says Albertsons is "looking for the right valuation" before going public. (Photo by Ethan Miller/Getty Images News)
It’s been nearly a year since Albertsons Cos. was left standing at the doorstep of the public markets, and according to some analysts it may have to get used to the view.
Albertsons’ proposed public offering a year ago was abruptly called off when rival Wal-Mart Stores confessed in an investor meeting that expenses associated with an internal restructuring would lead to earnings pressure beyond expectations. Wal-Mart’s news triggered a sector-wide drop in valuations coming just days before Albertsons was to begin trading on the New York Stock Exchange.
The Boise, Idaho-based company has been preparing a second run at an initial public offering this year only to encounter more market malaise — this time because persistent price deflation has become a risk to sales and earnings industrywide, including at Albertsons.
“Obviously, it depends on market conditions, but it’s kind of hard to see a scenario where Albertsons goes public at the kind of valuation that was contemplated last fall because the operating environment is just so different right now,” Ajay Jain, senior analyst at Pivotal Research, New York, said. “Sector valuations are also very different compared to last September or October.”
Several analysts pointed to Albertsons as one of the more aggressive players in several regions seeing hotter competition over the summer including Houston and Chicago.
“The one thing I would say is they are, again — maybe not as dramatically as Walmart — but they are moving the needle on volume by investing in price,” Mushkin said. “Maybe they’re renting customers because they’re so high/low, but they are moving the volume needle in their direction. And they’ve cleaned up the stores.”
These actions are keeping top line sales up as prices fall, but could be vulnerable to a counter-attack from a company like Kroger, Mushkin added.
“If Kroger decides to fight back in a meaningful way I would think Albertson’s share gains will evaporate,” he said.
No comments:
Post a Comment