Supermarket shares take a battering
Oct 23, 2014 at 1:55 pm in General Trading by contrarianuk
More bad news from Tesco this morning battered the supermarket sector again and sentiment wasn’t helped by a poor trading statement from Premier Foods, a key supplier to the grocery sector.
Tesco announced today that the accounting irregularity had meant that profits had been overstated by £263 million compared with earlier estimates of £250 million. £118 million of this was related to the first half of 2014, £70 million related to 2013 and £75 million to previous years. Like for like sales dropped 4.6% at the retailer. The shares are down around 7% to 169p, close to an 11 year low with Sainsbury and Morrison’s dropping in sympathy as the difficulties of the supermarket sector have been sharply into focus with Tesco’s troubles.
Tesco’s trading profit in the six months to August 23 fell from £1.59 billion to £937 million, pre-tax profit dropped from £1.47 billion to £783 million and profit after tax fell a staggering 92% from £1.39 billion to £112 million, after one-off items of £527 million.
Premier foods, manufactures of brands like Mr Kipling cakes and Bisto and very dependent on sales in the big UK grocers didn’t fair much better today after announcing its third quarter results and seeing its shares drop 13% to 30p, a 75% fall this year. Total sales were £177 million in the three months to 30 September, down 4.7 per cent on the same period a year previously, power brands were down 5.1% and non-branded products down over 10%.
Although management seem to be helping to drive sentiment in Tesco to dire levels, it looks like a little early to buy into the story right now even with Dave Lewis now at the helm. The question is how will Morrison’s and Sainsbury’s perform in the key Christmas trading period, companies I personally favour right now but who have plenty of problems of their own.
Contrarian Investor UK
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