Jim Armitage: UK supermarkets are finally ready to take on the discounters

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City analysts were focusing on the fine detail of Sainsbury’s figures this morning — school uniform sales: Up. Foreign exchange profits at the bank: Up. Cost savings: Up.

But smarter investors were looking at the bigger picture.

Chief executive Mike Coupe might be doing the right thing in making his business leaner and meaner, but today’s profits upgrade was largely due to a general improvement in consumer spending.

In Coupe-speak, the impact of this has been that “the decline in average basket spend in supermarkets continued to stabilise”.

Hence this morning saw big share price rallies not just in Sainsbury’s (up 11%), but its rivals too.

Tesco leaped 5% and still-troubled Morrisons 6%. 

It’s not just the wider economy that’s boosting the established grocers.

Key to the improved outlook is also the shrinking gap in prices between them and the German discounters Aldi and Lidl. 

Mike Coupe, clearly enjoying delivering the first good news since his elevation to the top job last year, said the discounters are now only around 5%-10% cheaper than Sainsbury’s and its peers.

After a painful adjustment, requiring cuts in overheads and dividends, our homegrown supermarkets may finally be getting fit to compete.

Avocado war is ripe

Sainsbury’s always likes to claim its food is better than rivals’. Hence its attempt to grab “Holy Guacamole” headlines this morning with an anecdote in its Stock Exchange statement about how the “ripeness and quality” of its avocados has improved.

But surely that just suggests they weren’t good enough before – quite an admission for the grocer that boasts it was the first to bring them to British dinner tables in 1962.

Source Article from http://www.standard.co.uk/business/jim-armitage-uk-supermarkets-are-finally-ready-to-take-on-the-discounters-a2958891.html

September 30, 2015 |
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