Goldman Sachs analysts:
1 in 5 UK supermarkets must close to restore profit growth
A large closure programme is the only viable solution to bring about a return to profitable growth for the UK supermarket industry, the analysts said in a report. With 56% of Tesco’s stores bigger than 40,000 sq ft, the report concludes the market leader has the biggest problem on its hands.
Goldman Sachs analyst Rob Joyce was gloomy about the ability of the major players to bounce back if the fight was based on price cuts alone. “We believe that any major price investments by Morrisons, Sainsbury’s or Tesco can be exceeded by the discounters,” he wrote. The unhealthy industry dynamic prompted him to predict large stores would suffer like-for-like sales declines of 3% a year until 2020, unless the big chains embrace the need for major surgery.
Too much focus on profitability allowed the “discounters to get too strong”, with incumbents, until recently, reliant on pushing up prices to combat falling sales, according to the report. But even Asda, which was the first of the big four to take on the discounters with a £1bn price cuts campaign, has started to show signs of strain.
All the major grocers have now taken a scythe to prices or sent out millions of money-off vouchers in an attempt to fend off Aldi and Lidl.
Sourc: theguardian.com
