Bulletin

Supermarkets must shut 20% of stores to get back to growth

A report by Goldman Sachs on the UK grocery industry has forecast that leading supermarkets need to reduce their store estates by around 20% to cut costs to be able to compete on price against Aldi and Lidl. Goldman analysts, led by Rob Joyce, said that sales in large out-of-town supermarkets will fall by 3% every year until 2020 if present trends continue. This would equate to an 18% fall in sales in larger stores over the next six years. Analysts said that stores could be redeveloped into residential property but that food retailers would have to write down the value of the sites by 35% to 70%. Goldman set a price target of 155p for Tesco, implying another 19% fall in its share price, and 155p for Sainsbury's, implying another 42% fall. However, Goldman predicted that shares in Morrisons could increase by 17%, because it has fewer stores than its rivals. The big four of Tesco, Asda, Sainsbury's and Morrisons have already significantly reined in UK store opening plans.

 

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