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The template of market share being lost by the big four food retailers to the smaller competitors has been in place for some time, and the latest results from Kantar have confirmed this stereotype. Tesco has seen its market share drift from 28.8% to 28.2% year-on-year, while Sainsbury’s – the best performing of the four – has managed to hold on to its16.2% share over the same time period. It is worth noting that Aldi, fresh from winning supermarket of the year awards, has seen its share jump from 4.8% up to 5.6%.
Adjusted earnings per share for Tesco and Sainsbury’s are called to drop from £0.077 to £0.058 and £0.145 to £0.116 respectively, and both companies are expected to post softer sales figures too. These less-than-inspiring figures have seen a divergence of opinion with institutional analysts. Tesco has nine buys, nine holds and six sells with a twelve-month price target of £224.73, some 28% above the current share price. Sainsbury’s has eight buys, eight holds and nine sells with a twelve-month price target of £278.13, 21% above the current market price.
So what does the current landscape look like for the major players in the food retailing sector? Competition remains fierce with the smaller firms continuing to eat into the historic dominance of the big four’s market share. Morrisons look to have kicked off the latest battle ground for these companies with its sizable increase to minimum pay for its staff well above minimum wage requirements. While at the same time, the continuing weakness in fuel costs will have helped all of these businesses with their sizable distribution networks.
Sainsbury’s will be happiest of the big four, but considering this is because it has managed not to lose market share, it will be a hollow victory and shows little sign that the food retailers are closer to turning that corner.