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UK supermarket stock not so hot

Wednesday, October 01, 2014 - 01:56

Shares in Britain's supermarket sector have fallen sharply since Tesco's accounting debacle. As an investigation into the scandal is launched by the UK's financial watchdog rival Sainsbury's adds to the gloom by cutting its sales forecast. Hayley Platt reports

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Falling sales, profit warnings and a shrinking share price. Perhaps not the best start for Sainsbury's new chief exec Mike Coupe. Sales at Britain's third biggest grocer fell 2.8 percent in the second quarter. Knocking the share price off by more than 3 percent. IG's Alistair McCaig says times are tough in the supermarket sector. SOUNDBITE: Alistair McCaig, Markets analyst, saying (English): "The phraseology out of Sainsbury's today looks very much like they're going to do a top to bottom review of the whole business, looking at everything all the way from dividends to store structuring and exposure to different regions and I think that they are going to very much analyse how the market has changed in the last 12-18 months and how they can remain competitive. Shares in the sector have taken a beating recently, thanks to intense competition and an accounting scandal at Tesco. Three billion pounds was wiped off the value of its shares last month after it overstated expected first half profit by 250 million pounds. Britain's financial watchdog is now investigating. Sainsbury says it has 100 percent confidence in its accounts. But expects tough trading conditions to continue for a while as consumers shop around for the best prices. Robert Cole of Reuters Breakingviews. SOUNDBITE: Robert Cole, Assistant Editor, Reuters Breakingviews, saying (English): "The supermarket sector shopping habits are changing and we need to try and give people discounts rather than special offers and that might be a sign of hope but at the end of the day all profits are going to go down." Part of the problem is shoppers shying away from doing their big weekly shop at supermarket superstores. Instead they prefer to buy little and often at smaller independents or shop online. The UK's big four are also being squeezed by budget brands Aldi and Lidl at the bottom and Marks and Spencer and Waitrose at the top. The change is clearly hurting - supermarkets are suffering their weakest growth for more than 20 years.

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UK supermarket stock not so hot

Wednesday, October 01, 2014 - 01:56