Sainsbury (j) Share Discussion Threads

[debsdowner] 18/4/2022 19:17

PH

Log is right margins have halved over the years and the same happened to MARKS just look at their profits they made a massive £1 billion profit years ago and they havent made that combined profit in the last 5 years:



People won't starve but they can buy cheaper and in the last decade ALDI and LIDL have taken market share and pushed margins to paper thin.

The large stores have too much shelf space which all needs heating and too many workers where as the discounters have fewer brands and less workers and furthermore as they have masses of small stores they are far more convenient so less petrol neeeded to get to the store.

[plat hunter] 18/4/2022 15:23

Lol, they do say a little knowledge can be a dangerous thing.Do you honestly expect that people will just stay at home and starve to death?The supermarket is the only place where margins are protected from inflation as they're the only places people will spend money in a crisis, as demonstrated 18 months ago.Our shopping bill has almost doubled over the last 2 years, anecdotal evidence of inflation getting passed on from the supermarket to consumer. Anyone who actually shops at a supermarket has witnessed this to some degree.

[debsdowner] 18/4/2022 15:14

The ISSA bros were also set to place a bid for BOOTS but it looks like they are out of the ring, BOOTS may do an IPO.

One thing for sure a nummber of very large supermarkets margins are set to fall and even collapse.

This is what Justin King warned after the financial crisis in 2008 and consummer spend is facing worse headwinds now than in the last crisis with a war footing also worrying the world economy.

The short selling funds pulled Carilon under and they must think as I do that consumer spend will hit retailers margins.

Lets face it there are far to many retailers and fashion brands out there in fact I susepct more now than in the 70s when things were booming in retail trade as we have the likes of BooHoo and ASOS but multiple brands under each of their companies.

I thought MARKS was comming through its bad times with new brands and third party deals but doing deals with third parties reduces margins and can canabalise existing brands.

There is only so much money in the economy and a lot of investors who buy retail fail to understand macro economics

[loganair] 18/4/2022 14:32

Sale and lease back by private equity, loading with debt then IPO Woolworths was also the main reason for their Demise, the same can be said for many UK companies.

The private equity firms desperately needs to sell parts of Morrison and Asda to raise money in order to pay down a little of the expensive debt they have taken on to buy these companies in the first place.

I have to chuckle every time I hear or read "the billionaire Issa brothers2 as Philip Greene of BHS fame was also very often called the billionaire Philip Greene until his companies went bust and he was not a billionaire any more.

[debsdowner] 18/4/2022 12:29

Sale and lease back typical of DEBENHAMS but maybe not quite the same. Sale and lease back is normally done by the company to raise cash but bad for a company long terms as they have to pay high lease charges.

That was part the demise of DEBENHAMS they got caught into lengthy leases which many were upward revisions.

[loganair] 17/4/2022 21:52

2 weeks ago - The new owners of Wm Morrison have given the green light to plans to sell a £500m chunk of its manufacturing and distribution real estate portfolio months after completing their £7bn takeover of Britain's fourth-biggest supermarket chain.



June 2021 - Supermarket chain Asda's distribution network has been sold for £1.7billion and leased back by the billionaire Issa brothers and investment firm TDR capital.

Asda's distribution arm is a logistics network that sends goods to its UK supermarkets, as well as directly to customers' homes.

It includes 21 food depots, three centres for its George clothing range and two for 'general merchandise' - non-food goods such as lightbulbs.

It also includes two centres for imported goods and two for handling customers' online orders.

Also bundled up are nine recycling centres, which process the packaging used to transport Asda items.

[debsdowner] 17/4/2022 21:17

log,

Thanks for the explanation on ASDA profits you have done more research on those figures than I have.

I entirely agree with what you say about ASDA as well in fact MORRISONS got plenty of freeholds but the deal with private equity prevents them doing sale and lease back.

Like Tim I am not sure about the percentage of workers going to lenders or food banks but it wouldnt surprise me as the Resolution foundation see a third or so workers on miminum pay having to borrow money.

This is going to get worse this year with inflation and energy and fuel costs rising in double digits.

I am afraid some retailers are going to take a hit and large ones at that. Iceland has seen a fall in footfall.

The supermarkets also have B&M taking market share off the supermarkets as they expand and Home Bargains which is a private company and doesn't have to deal with shareholders (listed PLC's).

[loganair] 17/4/2022 20:54

Personally I know a fair few people who borrow money, take out a personal loan from the bank in order to pay for their holidays or put on their credit card and just pay the interest leaving the rest of the balance on their card.

[tim 3] 17/4/2022 20:31

Am a bit suspicious of some of these figures I work in a supermarket and most staff are planning holidays usually abroad not visiting food banks!

[loganair] 17/4/2022 19:57

More than half Asda workers have been forced to use 12% payday lenders, 8% foodbanks or 50% borrow money of family and friends in the past 12 months.

Workers at the supermarket giant shows just 4% of Asda workers say they will be able to afford higher energy costs when the price cap rises.

Asda pay retail workers below the average for big supermarkets, with workers at Tesco, Sainsbury, Lidl and Aldi all receiving more money per hour.

[loganair] 17/4/2022 19:50

The Private equity group that took over Asda is already well in the process of selling and leasing back any freeholds they may have in order to pay down debt.

Asda profits have risen sharply over the past year to £1bln...not really as property sell offs account for over half this profit, therefore the £1bln is not a true profit.

Then like with Debenhams I see after being striped of all its assets and loaded up with debt, Asda being IPO'd back on to the stock market, especially after fattening its profits with property sell offs, fattening up Asda for on an onward sale.

As Asda by then with no assets and loaded with debt will not have any money or be able to borrow in order to either grow or fend off the discounters.

Already being reported "the debt-fuelled takeovers of Asda and Morrisons has them badly prepared for grocers’ latest price wars. “Both have been left leveraged up to the eyeballs after succumbing to private equity buyouts financed by high-cost borrowings, leaving them less able to compete on price.”

And

"Add the fact that Aldi & Lidl are capable (each being part of a big global enterprise) of running at a loss in the UK. For as long as it takes to optimise their share of UK grocery...with limits on the ability of the big 4 supermarkets to retaliate.

Remember Tesco's have sold off most of their international, often highly profitable stores, especially those in S. Korea.

[debsdowner] 17/4/2022 19:39

log I conur with your thoughts on market share, I have a MARKS thread and post Kantar market share every month you are correct it wont take long for ALDI to be ahead of Morrisons in fact oit wont be long before ALDI is in third place behing Sainsburys.

Both ALDI and LIDL taken a massice market share off the big four.

It really is a cut throat business now margins have almost halved since the german discounters upped their game.

I think the competition group had to stop the takeover of ASDA but as margins fall there will probably be a causualty.

[loganair] 17/4/2022 18:55

Today the German discounters have a combined market share of 15%, basically the same as Sainsbury's.

20 odd years ago, Sainsbury's had circa 10 times the market share of Aldi/Lidl and where it seems to me Sainsbury's BOD, Sainsbury's generals made their biggest mistake was at the time they couldn't even image Aldi/Lidl ever being the same size, marketsharewise as Sainsbury and therefore at the time didn't put in place any defensive measures to combat their rise.

It is only after the discounters flood gates had opened did Sainsbury's even try to start to stop, try to slow the water from flooding in - Too little, Too late by Sainsbury's.

If Sainsbury's take over of Asda had been allowed to go through, today they would have a market share of 29.6% - circa 1.5% for the stores they would have had to sell, giving them a market share of 28.1% which is exactly the same as Tesco had in November 2017.

[loganair] 17/4/2022 18:24

Since the beginning of 2019 to today the supermarket market share are as follows.

Tesco.....27.7% to 27.4% lost 0.3%
Sainsbury 15.9% to 15.1% lost 0.8%
Asda......15.3% to 14.5% lost 0.8%
Morrison..10.6% to 09.5% lost 1.1%
Aldi.......7.5% to 08.6% gain 1.1%
Lidl.......5.3% to 06.4% gain 1.1%
Coop.......5.9% to 05.7% lost 0.2%
Waitrose...5.1% -- 05.1%
Iceland....2.3% to 02.4% gain 0.1%
Ocado......1.2% to 01.8% gain 0.6%

Therefore Morrison are on the back foot the most followed equally by Sainsbury and Asda.

Ocado is advancing as well as Aldi and Lidl, possibly in the next couple of years Aldi will over take Morrison to become one of the UK's top 4 supermarket chains by market share.

[debsdowner] 17/4/2022 17:56

log, that is a shock and they wouldn't be on their own quite a few retailers had similar margins but its a changed world now and margins are getting ever thinner.

What may happen as margins fall is dividends fall as well growth has gone.

[loganair] 17/4/2022 16:08

In the 1980's Sainsbury's operating margins were over 7% and often higher.

[debsdowner] 17/4/2022 15:54

King left in 2014 and in the last quarter of his reign sales started to fall



Currenr operating margin 0.2% forecast 2.3%

[...]

It will only take a small fall in sales to decimate profits and go into loss.

[loganair] 17/4/2022 15:38

Why is Sainsbury failing?

1. Tesco’s improved performance and continued rise of the discounters Aldi and Lidl.

2. Too expensive for value shoppers and not perceived as high enough quality for the premium shoppers and like with M&S, since the mid 1990's Sainsbury’s doesn’t really know what it wants to be.

[loganair] 17/4/2022 15:33

The 5 years (2012-2016) before Sainsbury's bought out Argos, on Average Argos yearly profits where circa £100mln on £4bln yearly turn over.

I forgot to mention in 2016 as well as Argos stand a lone stores there were also 57 Argos stores in Homebase and 37 Argos collection points plus the 8 Habitat stores which have now all been closed.

Sainsbury's have been struggling to make decent profits since the mid 1990's as their heyday was from the mid 1960's to the early 1990's, since then its been Tesco all the way.

[debsdowner] 17/4/2022 15:17

loganair, according to your brief analysis charges are going to muddy the water in SAINSBURYS accounts for some time.

Presumably the closures and cost savings on the High Street going to improve margins and profitability

I don't know what ARGOS was makimg before they bought out ARGOS and how much they will make after the closures are complete?

But SAINSBURYS has been struggling to make decent profits for 5 years now, just like MARKS.

Mind you Morrinsons and ARGOS are both losing market share some of that loss to both ALDI and LIDL.

I am also sceptical about SAINSBURYS price match against ALDI, TESCO tried this but I don't think it made much difference as both ALDI and LIDL racing ahead.

SAINSBURYS must be losing market share to the discouters, the market is saturated and competitive.

I remember Justin King warning after the last financial crisis a big supermarket could easly go under he got out at the right time, after he ledt SAINSBURYS sales and profits started to struggle.

Margins are so small it will only take a small percentage drop in sales to hit profits.

Was ARGOSD a good buy ? It is too early to say but your anaysis makes it questionable.

[loganair] 17/4/2022 14:46

Sainsbury’s wants to open more Argos outlets in its supermarkets and plans 350 of these by March 2024. It also announced last year it planned to slash Argos branches due to changing shopping habits following the pandemic.

As a result, 420 standalone stores are being closed across the country, which will leave just 100 on UK high streets by 2024.


In 2016 Argos had 583 stores most of which where stand alone stores while by 2024 will be left with 450, most of which will be outlets in Sainsbury stores and not be stand alone stores. This also means an overall reduction of 133 stores/outlets (23%).

So far Sainsbury has taken £438mln in charges on the cost of Argos closures and by 2024 expects this figure to reach £1bln.

£1.4bln to take over Argos + £1bln in costs by 2024 which means the total cost for Sainsbury to take over Argos will be at least £2.4bln by 2024 while Sainsbury's market cap is no higher today then it was in 2016 when they took over Argos, it's with in just £100mln.

I ask myself - Was Argos a good buy for Sainsbury?

[debsdowner] 17/4/2022 13:56

Time to sell Blackrock and another heavyweigh shorting MARKS & SAINSBURYS:

Two of the world's most powerful investors are betting against Marks & Spencer in a blow to its new chief executives.

The Mail on Sunday can reveal that BlackRock, the world's biggest asset manager, and hedge fund Marshall Wace are shorting the retailer's stock.

The funds have disclosed the combined £35million short position just weeks after the retailer announced that food boss Stuart Machin will become chief executive, alongside Katie Bickerstaffe.

Richard Hyman, partner at retail consultancy TPC, said: 'The M&S leadership team has focused too much on food and not enough on investing in fashion – which is higher margin.'

M&S's decision to employ an unconventional management structure has created uncertainty. Hyman said: 'It strikes me as a cop-out. It's very difficult to have two chiefs.'



With consumer spend set to hit retail sales Blackrock evidently feels MARKS will dissapoint.

[debsdowner] 17/4/2022 13:55

Time to sell Blackrock and another heavyweigh shorting MARKS and SAINSBURYS:

Two of the world's most powerful investors are betting against Marks & Spencer in a blow to its new chief executives.

The Mail on Sunday can reveal that BlackRock, the world's biggest asset manager, and hedge fund Marshall Wace are shorting the retailer's stock.

The funds have disclosed the combined £35million short position just weeks after the retailer announced that food boss Stuart Machin will become chief executive, alongside Katie Bickerstaffe.

Richard Hyman, partner at retail consultancy TPC, said: 'The M&S leadership team has focused too much on food and not enough on investing in fashion – which is higher margin.'

M&S's decision to employ an unconventional management structure has created uncertainty. Hyman said: 'It strikes me as a cop-out. It's very difficult to have two chiefs.'




With consumer spend set to hit retail sales.

[loganair] 17/4/2022 09:06

Discretionary spending in general will go out the window.