Adrian HollidayOn Tuesday Sainsbury’s revealed a shock first quarter 8.2% profits cut to £503m. Tesco responded with a trolley wobble of its own, its shares dipping 3.5% almost immediately. The three major supermarkets, Tesco, Sainsbury’s and Morrisons slashed fuel prices on Wednesday – 2p off diesel and 1p off petrol – in a bid to retain market share.
Then this morning, Friday, M&S announced the appointment of new chairman Archie Norman (ex chief exec of Asda). A fast-moving, tough week. Who, then, comes out best? Paul Thomas, senior consultant at Retail Remedy, says it must be Tesco.
“Tesco has [boss] Dave Lewis. He’s getting rid of businesses he doesn’t need and getting back to being a grocer. Lewis is working at strategies to offset the discounters, Aldi & Lidl. Tesco has the largest non-food offering of all the supermarkets. Clothing and general merchandise is a big margin generator for Tesco.”
Tesco isn’t problem-free. Thomas says Tesco has the largest stores and its customers are shopping less at them. “But equally it [Tesco] has the largest amount of express and convenience stores.” A sector that has grown fast as the Big Four take the sales fight to Lidl and Aldi, wherever they lie.
In comparison to Sainsbury’s Morrisons had a good week. Yesterday it revealed 3.4% like-for-like sales growth for the first quarter thanks to a swathe of price cutting and a strong Easter. Morrisons chief exec David Potts wants to put their premium ‘The Best’ range – it contains more than 450 lines – close to the centre of their growth strategy.
“They’ve [Morrisons] got some good strategies closely aligned with Tesco,” says Thomas. “They’re getting back to being a core grocer, more people on the shop floor. They’re working hard on their Best brand, trying to tap into the Waitrose-type customer.”
Despite the grim profits pressure on Sainsbury’s Thomas is bullish on its Argos acquisition. Non-food margins are decent and give Sainsbury’s more flexibility to further develop the non-food offer. “It’s a more balanced approach. It will help profits and topline sales.”
But Sainsbury’s mustn’t spend too much time sharpening its new acquisition, otherwise it could fall behind he says.
Which leaves Asda. “Why go to Asda? They’ve taken cost out but it’s not as fun any more. The stores are that bit more soulless.” Thomas suspects operational and stock difficulties.
“They’re ripped out lots of cost in the last two of three years – a focus on the Walmart [Asda owner] model.” He thinks Asda may have now compromised their point of difference. “When there are peaks in trade, availability suffers – Christmas, Easter. The spikes are managed less well. The point is, people remember those experiences.”
So, Tesco at number one, Morrisons in second place, Sainsbury’s third – and Asda last.
