Sainsbury (j) Share Discussion Threads

[loganair] 17/4/2022 20:52

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 20:17

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 19:54

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 19:31

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 18:57

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 18:50

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 18:39

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 17:55

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 17:24

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 16:56

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 15:08

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

[debsdowner] 17/4/2022 14:54

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 14:38

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 14:33

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 14:17

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 13:46

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 12:56

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 12:55

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 08:06

Discretionary spending in general will go out the window.

[loganair] 16/4/2022 19:12

Inflation is a real threat for grocery shares like Sainsbury’s and Tesco given their wafer-thin profit margins. Indeed, the retail underlying operating margin at Sainsbury’s slumped to 3.37% in the first half, down 40 basis points year on year.

High inflation will likely prove to be a temporary problem. What won’t, however is the intensifying threat posed by its competitors on the ground and in cyberspace.

At the same time, Sainsbury’s needs to spend to stay in reach with its established rivals like Tesco and the discounters Lidl and Aldi.

The business has parked hundreds of products under its Price Lock guarantee to keep shopper costs low. It’s likely going to need to keep slashing prices at the expense of margins to stop cash-strapped shoppers deserting for its cheaper rivals.

Sainsbury’s has spent on its online business is paying off. Digital sales jumped 92% in the 16 weeks to 8 January on a two-year basis. It suggests that the FTSE 100 firm could really make a splash in the fast-growing e-grocery industry.

High inflation will likely prove to be a temporary problem. What won’t, however is the intensifying threat posed by its competitors on the ground and in cyberspace.

Aldi and Lidl are hastily expanding their store footprints across the UK. Amazon is also investing heavily in stores as well as its online operations. And all of the country’s major grocers are bulking up their online operations too.

And talking once more of dividends, I like the fact that the predicted full-year payout of 12.2p per share for Sainsbury’s looks quite well protected.

That City estimate is covered 1.9 times by anticipated earnings. This is roughly in line with the widely-accepted security benchmark of two times.

What’s more, in January Sainsbury’s said that free cash flow remains “strong”. It also said that it should hit its net debt reduction ahead of target, in an extra boost to the balance sheet.

[plat hunter] 16/4/2022 10:14

Look at Tesco's performance then throw in Argos on top of that, right after the whole country went mental for 2 years in the supermarket and online ordering, electronics, kids stiff, home and garden etc etc.Huge divergence occurring on the chart, coincidence or confluence?

[loganair] 15/4/2022 12:34

I ask myself - What is Sainsbury doing about increasing its margins?


Tesco profit before tax rose 220% last year, as sales rose and costs fell. Revenue excluding fuel rose by 6% and the company’s operating profit margin increased from 2.7% to 4.2%.

CEO Ken Murphy is also “laser focused” on keeping the cost of its wares down, as Tesco does “everything221; it can to maintain its value proposition.

Management has the flexibility to continue to reduce operating costs and return the savings to consumers.

Tesco plans to reduce costs by £1bn over three years by streamlining its property footprint and cutting head office costs. It is also re-thinking the way staff are deployed in stores.

Tesco’s supply chain is miles ahead of the competition. It has been able to navigate the UK’s supply chain issues by investing in new and old technologies, such as electric HGVs and rail.

Over the past year, the retailer has increased the number of its containers transported by rail by nearly 50%, with plans to increase capacity by around a third in the near future. Each train takes around 40 HGVs off the road, slashing the number of drivers required in a tight labour market. By transporting fresh produce from Europe by rail, the company has also been able to bypass Brexit-related disruption at the Calais-Dover pinch point.

Tesco stands apart from the crowd as uncertainty builds.

[philanderer] 13/4/2022 08:23

TSCO read across, oh dear.