Premier Foods still feeling the squeeze

The price war between food retailers has hurt Premier Foods as margins have been squeezed, but is its light at the end of the tunnel?

Woman buying lettuce
Source: Bloomberg

On Thursday 23 October, Premier Foods is due to post its third-quarter figures. So far 2014 has been a tough year for the food producer as it has had to contend with a price war between the major four food retailers in the UK.

This has compounded the issues of too-high debt stemming back to the aggressive strategies of four or five years ago. The management has managed to tackle many of these issues and on an ongoing basis, is less bound by historical mismanagement.

Has Premier Foods hit the turning point yet? We will get a better idea on Thursday but the answer is probably going to be not yet. The good news however, is the company is far closer to turning that corner.

This weekend Deloitte issued a consumer confidence survey and stated that in the UK it was at its strongest levels for the last three years. Although worries over the eurozone persist this should at least maintain, if not improve the short-term outlook in the retail sector.

Regardless of how much closer the company might be to the turning point, it has still not reached it and even the 50-day moving average of 38p still looks an ambitious target to reach, let alone break. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.