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$5 Gas Would Hurt Supervalu: Analyst

NEW YORK — The prospect of gasoline retailing for $5 a gallon would disproportionately impact food retailers with price credibility issues, according to a report released Wednesday by BMO Capital Markets.

Karen Short, a BMO analyst covering food retailers, cited Supervalu and convenience store operator The Pantry as companies most likely to be negatively impacted by $5 gas.

“Both companies have credibility issues with consumers as it relates to pricing, and in an environment where consumers feel increasingly pressured, we are not sure that either company has the financial flexibility to remain competitive on pricing and turn around recent traffic losses,” Short said.

BMO said convenience stores with strong food offerings — Casey’s General Stores and Susser Holdings (parent of the Texas-based Stripes convenience chain) — were best prepared to weather the prospect of $5 gas, as they would benefit from more frequent visits and could also realize growth opportunities as competitors struggle.

Short said the impact of $5 fuel would be “neutral” for Kroger and Whole Foods and “incrementally negative” for other food retailing companies BMO follows including Safeway, Harris Teeter, Spartan Stores, The Fresh Market and United Natural Foods Inc.

Overall, BMO economists said $5 gasoline “would slow the US expansion materially and raise the unemployment rate,” draining $170 billion from annual purchasing power. “By itself, it probably would not lead to a recession, but the adverse effects of higher joblessness on already-weak consumer confidence and housing markets could be troublesome, especially if Europe’s credit crisis worsened,” BMO said.

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