SuperValu — or Super-Value Trap?

After a five-year selloff, is SuperValu (NYSE:SVU) finally ready to recover? The 27% rally over the past three days is the most progress we’ve seen in weeks, after all, and the move is backed up by a forecast for the first earnings growth we’ve seen in years.

Or is this week’s bounce from SVU just another sucker’s rally, with dwindling revenue and shrinking income in the cards for this grocer?

As it turns out, things truly might be different now. First things first, though — the ugly (and progressively uglier) background.

A Glimmer of Hope?

On a non-GAAP basis, every year since 2008 has been less profitable than the last for SuperValu. And we’re talking some major declines. From 2008’s per-share operating income of $2.85 to $1.93 the next year to $1.39 the next year to a profit of only $1.25 last year, the bottom line has been backed up to early 2000 levels.

Revenue has fared no better. The grocery chain’s 2008 (fiscal 2009) top line of $44.5 billion has been whittled down every year since, to only $36.1 billion last year. Ugly.

Given the trend that’s in place, it forces one to question how in the world the stock mustered the 27% gain it has this week, even if it was dramatically oversold thanks to a selling effort that kicked off at the beginning of the year. (As of the end of last week, SVU was down by 37% for the year.)

The answer to that question is simple … there’s finally hope. The grocery store chain has a turnaround strategy, and analysts say next year’s income will be higher than this year’s — for the first time in years — reaching $1.32 per share.

All well and good, though there’s a problem with a bullish prompt like that: The road to the poorhouse is paved with hope. If SuperValu really is on the mend, it better be backing up that hope with something that’s actually got fiscal teeth. That’s where things start to get shaky again.

Better Numbers, But…

Not that one quarter makes or breaks a trend, but all big trends start out as small ones. That’s why SuperValu’s fourth-quarter numbers were at least the foundation of hope. Rather than earning the expected 35 cents per share, the grocer took home 38 cents per share, on an operating basis. Revenue beat estimates as well.

Unfortunately, that’s where the good news starts and ends.

While it topped earnings and revenue estimates, the bottom line still trailed last year’s Q4 profit of 44 cents per share, and the top line still was shy of the sales total for the same quarter a year earlier. Translation: No actual progress yet.