Supermarkets are gearing up for a Christmas price war as the big four battle to fight off the German discounters. As Sainsbury (J) (SBRY) reported a 92% slump in profits, experts said shoppers look likely to benefit from competition among the country’s biggest grocers over the festive period. Sainsbury’s profits fell to just £9million in the six months to September 21, from £107million in the same period last year.The collapse came as the chain closed stores and slashed prices on more than 1,000 products. Operating profits, a measure of the underlying health of the business, fell 15% to £238million while store sales were down 1%. Margins fell to less than 3% as bosses admitted they kept a running list of items that are cheaper than Aldi and Lidl. Tesco (TSCO) said it was price-matching more than 400 products to the closest competitor, or the ‘cheaper of the two discounters’ Aldi and Lidl, helping to fuel the race to the bottom. During autumn the proportion of items on promotion increased for the first time in four and a half years, driven by Tesco’s ‘100 years of value’ campaign and Sainsbury’s ‘Price lockdown’, according to Kantar data. A Sainsbury’s insider said: ‘Pricing is a big part of the strategy. You can expect prices will be low at Christmas.’ And Morrison (Wm) Supermarkets (MRW) yesterday said it had reduced prices on 2,000 products and that ‘becoming more competitive is one of our priorities’. The German supermarkets have captured 14.1% of the market, claiming to undercut the big players in the UK on price by as much as a quarter. The total market share of the big four has shrunk to 62.7% – the lowest since 2004. Aldi has overtaken the Co-op to become the UK’s fifth biggest supermarket, while Lidl is seventh.
ITV (ITV) has entered the video streaming wars by launching a UK rival to Netflix. Britbox, a service developed with the BBC, Channel 4 and Channel 5, is part of chief executive Carolyn McCall’s plans for reducing the broadcaster’s dependence on falling advertising revenues. It is being billed as the biggest collection of British shows ever assembled, featuring favourites such as Downton Abbey, Only Fools And Horses and Doctor Who starring Jodie Whittaker. The £5.99-a-month service was launched yesterday, just days before ITV updates investors on its third quarter trading. McCall is grappling with weak advertising revenues and growing competition from bigger American rivals, which are also launching their own streaming services. ITV and the BBC, which revealed yesterday that Channel 4 and Channel 5 are joining them, have admitted they cannot match the blockbuster budgets of rivals such as Amazon and Netflix.
Superdry (SDRY) founder Julian Dunkerton insisted his first six months back in charge of the business amounted to a ‘reset’ despite a fall in sales. The fashion company pulled in £368million of revenues in the six months to October 26 – 11.3% less than the year before. Dunkerton, who donated £1million to the People’s Vote campaign for a second Brexit referendum, has promised to restore the fashion retailer to its ‘former glory’ by returning to its ‘designled roots’. He partly blamed the drop in sales on removing ‘constant’ price promotions, and this had helped margins. The father-of-two said: ‘We are making good progress with the start to our turnaround plan.’
Rolls-Royce Holdings (RR.) has cut its profit guidance for the year as it continued to be plagued by problems with its troubled Trent 1000 engines. The engineering giant said it expects operating profits for the full year to receive a £1.4billion hit due to the high costs associated with the engine’s faulty blades. In a trading update, it also pushed back its predicted final repair date for the engines to 2021 as it continues testing on the blades. The firm have announced it will spend an extra £400million on repair costs and make additional spending on spare engines and maintenance capacity. Norwegian Air, Singapore Airlines and British Airways are among the airlines that have grounded planes that contain the Trent 1000 engines.
Attempts by Persimmon (PSN) to improve the quality of its homes have eaten into sales. The housebuilder said sales fell by 6% in the first half of 2019. The company said it was expecting a similar drop in the second half. The update came as rival bought Galliford Try (GFRD) housing arm for £1.1billion. The deal will more than double the size of Bovis’ housing business, making it the UK’s fifth-largest builder at a stroke. Persimmon’s sales fall came as the company started putting up homes for sale at a later stage of the construction process so that customers who view them get a better idea of what the finished product will look like.
Store closures, bad weather and stagnant sales have seen Sainsbury (J) (SBRY) pre-tax profits drop by almost £100million in the six months to 21 September. The fall comes in spite of the supermarket cutting prices for its 1,000 best-selling groceries, and launching new ‘Value’ brands. Total retail sales during the period essentially remained flat at £15.1billion, with general merchandise division experiencing the largest fall in sales, dropping by 2.5% with the clothing division having the next largest drop, at 1.2%. Pre-tax profits fell to £9million in the six months to September 21 from £107million a year ago, though the company’s debts dropped considerably by £367million. The company said the large fall in pre-tax profit was mainly due to one-off £203million write-down in the value of its store estate that mainly reflected store closures. The supermarket giant is in the process of making around £500million in cost savings, which will partly come from closing Argos stores and moving them onto Sainsbury’s sites.
Aston Martin Holdings (AML) lost another £92.3m over summer as demand for its Vantage two-seater sport cars weakened. However, its third quarter figures could have been worse, had it not been for six sales of its most expensive car – the DB4 GT Zagato Continuation, which is part of an exclusive £7.2million pairing. The reborn version of Aston’s 1960s race car can only be bought alongside its new 200mph-plus DBS GT Zagato for £6million plus VAT – with just 19 being sold. In yet another disappointing update, James Bond’s favourite car brand said it continued to suffer ‘tough trading conditions’ in the UK and Europe, with sales of its Vantage slipping. The company made a pre-tax loss of £92.3million in the three months to the end of September, with total revenues down 7% to £657.2million for the year-to-date.
has penned a more than £1billion deal for Galliford Try (GFRD) residential building business, it said this morning. The deal will bring together parts of two of Britain’s biggest builders, both listed on the FTSE 250, the UK’s second tier index. It was first floated as an idea by both boards in September as housebuilders faced increasing pressure in an uncertain market in the run-up to Brexit. Thursday’s announcement confirmed reports in the Sunday Times that Galliford chief executive Graham Prothero would join up with his old boss Greg Fitzgerald, the chief executive of Bovis who held the same role at Galliford until 2015. Mr Prothero will become chief operating officer, the companies confirmed. Mr Fitzgerald and finance director Earl Sibley will stay in their roles.
Shares in TheWorks.co.uk plc (WRKS) collapsed after it warned that profit will be much lower than expected. The cut-price books, games and jigsaw puzzles seller said it had been hit by a ‘difficult consumer backdrop’ amid a crisis on the High Street. The Works is confident going into Christmas trading with its slew of Disney film Frozen 2 merchandise and is using retail closures to its advantage by opening dozens of stores.
Making an early push into the US gambling market is reaping rewards for Paddy Power and Betfair owner Flutter Entertainment (FLTR). Growth in the group’s business across the Atlantic surged by 67% in the third quarter to the end of September, driven by an ‘excellent’ demand for sports betting and online games. Revenues from the firm’s online casino games stateside, for example, rocketed 174%. Total revenue grew by 10% to £533 million when compared with the same three months of last year. The American gambling frontier is gradually opening up to companies such as Flutter as online betting is steadily being legalised state by state. And this is helping to offset falls in other areas – notably the UK retail market, where revenues from betting shops plunged 9% to £75 million following Government crackdowns on fixed-odd betting terminals, where punters can now only bet £2 at a time, down from £100 previously.
Tate & Lyle (TATE) beat analyst estimates to post a staggering 45% rise in pre-tax profits, to £164 million, between April and September. This was on a 6.7% rise in revenues to £1.48 billion and came as a cost-cutting drive by Nick Hampton got under way, saving around £25 million in the last year.
Auto Trader Group (AUTO) made gains in early trading, but eventually closed down 1.8p, to 547p. Its first-half revenues grew 6% to £186.7 million, all the more impressive in the midst of a widespread downturn in the car market. Profit before tax rose 12% to £127.7 million as it managed to attract more car traders to sign up to be available on its website.
Hiscox Limited (DI) (HSX) issued an update to the stock market in response to a sharp share price fall. The drop was prompted by some scathing broker notes which raised questions about how profitable it estimates its retail insurance arm will be over the next few years. Although those who do not follow the insurance market closely will be baffled as to why this was so important, rest assured it was.
