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British supermarkets now a juicy price

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03-13-2014 , 09:05 PM

rwillia789

adept

Join Date: Mar 2010 Posts: 927

Tesco, Morrisons & Sainsbury's have crashed for the last few months basically off the back of Lidl increasing market share and disappointing Christmas revenues but this panic looks short lived. Tesco especially is so solid with it's monopoly power and massive real estate ownership. I plan to invest 20% of my life roll among these 3 next week.

Tesco
https://www.google.co.uk/finance?q=L...7HXMcSGwAORnQE

Sainsbury's
https://www.google.co.uk/finance?q=L...8CyBOatwAOp3QE

Morrison's
https://www.google.co.uk/finance?q=L..._jXKcSZwQPPzAE

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03-14-2014 , 05:50 AM

steelhouse

banned

Join Date: Feb 2007 Posts: 6,109

Thank you. We in the United States also get advantage since we can eliminate most of the dividend taxes.

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03-14-2014 , 07:31 AM

Born2DogBaby

journeyman

Join Date: Oct 2005 Posts: 375

What are your thoughts on this story: http://www.ft.com/cms/s/0/6deb74a2-a...#axzz2vrBSC9KT

Seems to point to the panic not being short-lived as you say, since there are fears of margin-destroying price wars to come

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03-14-2014 , 05:08 PM

Kid junior

newbie

Join Date: Jan 2013 Posts: 17

I would imagine a price war would have to continue because the discount stores have no reason to let up. They are structured to win cost battles so they are probably loving that the big chains are going along with it. I imagine the only resolution would be that big chains redesign themselves into more premium stores, like whole foods in America, or else they will just bleed money indefinitely. Either way I would imagine they will lose money for a while and eventually stabilize themselves with considerably less market share.

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03-14-2014 , 05:33 PM

jimi1999uk

old hand

Join Date: May 2008 Posts: 1,893

Don't you think Tesco has more to lose against the Lidl's of the world than say a higher-end Sainsbury's? If anything I think the Tesco brand is weakest out of all the big brands imo. Cheap but 'meh' on quality. This is one person's view right enough, could be (and probably am) wrong lol.

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03-15-2014 , 06:58 AM

thediceman

Carpal \'Tunnel

Join Date: Feb 2013 Posts: 10,695

Thought lidl was just for poors.

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03-15-2014 , 01:19 PM

ChipsAhoya

2011 $10k Stud8 Champion

Join Date: Oct 2004 Posts: 6,890

the UK grocery sector is getting tremendously beat up. Tesco doesn't have any monopoly power at all as sales and margins have been consistently declining.

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03-15-2014 , 02:11 PM

Born2DogBaby

journeyman

Join Date: Oct 2005 Posts: 375

Quote:

Originally Posted by thediceman

Thought lidl was just for poors.

A lot more people count as 'poors' now than before, squeezed middle and all that.. lidl/aldi are rapidly becoming acceptable for lots of people for whom it previously wasn't.

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03-19-2014 , 11:26 PM

BishBashBosh

enthusiast

Join Date: Nov 2011 Posts: 79

Quote:

Originally Posted by jimi1999uk

I agree with this. I think Sainsbury's will come out of this strongest.

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03-22-2014 , 05:50 AM

#10

Omahaha

veteran

Join Date: Apr 2008 Posts: 2,616

Quote:

Originally Posted by thediceman

Thought lidl was just for poors.

Not at all they are basically importers of European food brands. We shop their often due to quality and unique products that cant be found elsewhere.

They have become more and more popular amongst foodies in recent years.

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03-23-2014 , 01:51 PM

#11

chezlaw

Limey Bastard

Join Date: Jan 2004 Posts: 46,910

Supermarkets would really worry me. In the last few years where I lived there has been a new Tesco, three new waitrose and a new Sainsbury. We were already very well served with supermarkets and this phenomena seems to be going on everywhere.

Some of this has stolen business from local butchers etc but they have mostly gone now and its just spending more and more for a share of a fixed market.

Backing the right horse might be profitable but as a sector it looks horrible to me.

Delivery could be a huge factor as well. If the brand becomes Ocado or some other delivery organisation (what price Amazon?) instead of Tesco, Waitrose etc then that could really hurt.

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03-23-2014 , 03:49 PM

#12

DickFuld

Pooh-Bah

Join Date: Sep 2007 Posts: 4,113

I am American so take my opinion as it is, but from limited research here it seems you chose 3 brands that compete directly with one that is rapidly increasing market share. Investing in all 3 losers in a space that is heavily competitive and starting to become prone to disruption (online grocers, amazon uk etc.) is not a good idea. You should really evaluate who will be strongest of the three as it appears they are going to risk plunging their margins in order to stay competitive. Is there a particular brand that is innovating better, losing less share than the rest, better capitalized for a price war?

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03-23-2014 , 11:54 PM

#13

rwillia789

adept

Join Date: Mar 2010 Posts: 927

i prefer tesco because its the biggest but hedging smaller bets with the smaller two (either of which could be prime for a buyout)

obviously buying into a news led panic sell off will attract comments like its a failing industry so can we safely assume you sold these companies at 20% or 50% higher value a few months ago?

betting is always about price not "i dont like this"

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03-24-2014 , 02:20 AM

#14

donfairplay

grinder

Join Date: Nov 2006 Posts: 678

Unless other investors also say 'i don't like this' which in turn decreases the price.

Tesco lost a truckload of money in the US with Fresh N Easy. Perhaps they're not prepared for every new region they enter.

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09-22-2014 , 06:34 AM

#15

donfairplay

grinder

Join Date: Nov 2006 Posts: 678

Now trading at 30% less than initial post, dividend was cut, plus an accounting scandal.

Although today's action may qualify as a 'news led panic sell off', I wouldn't average down.

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09-22-2014 , 02:40 PM

#16

steelhouse

banned

Join Date: Feb 2007 Posts: 6,109

Tesco, TSCDY, sustainable dividend seems about .20 lb
Sainsbury, JSAIY, sustainable dividend seems to be .05 lb
Morrisons, MRWSY, sustainable dividend seems to be 0.05 lb
Marks and Spenser, MAKSF, sustainable dividend seems to be .35 lb

Purchase property plant and equipment seems to eat all grocery profits. If the money is spent on new stores, ok. If the money is spent on upgrading stores then when will it end. Can British firms deduct depreciation?

If stuck with one it would be MAKSF.

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09-25-2014 , 08:16 AM

#17

rwillia789

adept

Join Date: Mar 2010 Posts: 927

i ended up just buying tesco at 2.83 and another clip at 2.44. this accounting error ****ing stinks as i know a lot of funds shorted around 3.00 after speaking to someone well connected recently.

even with the error profits will be around 1.8b and current valuation is 16b. i cant believe that tesco is worth 45% less than 12 months ago.

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09-25-2014 , 08:33 AM

#18

ODUK

newbie

Join Date: Jul 2014 Posts: 41

Quote:

Originally Posted by rwillia789

even with the error profits will be around 1.8b and current valuation is 16b. i cant believe that tesco is worth 45% less than 12 months ago.

I think it will recover, 45% decrease even with the "accounting error" and profits down seems way too much.
I would have also agreed with your initial analysis.

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09-25-2014 , 10:34 PM

#19

ChipsAhoya

2011 $10k Stud8 Champion

Join Date: Oct 2004 Posts: 6,890

Quote:

Originally Posted by rwillia789

Quote:

Originally Posted by ODUK

I think it will recover, 45% decrease even with the "accounting error" and profits down seems way too much.
I would have also agreed with your initial analysis.

why not? next year's earnings estimates are down almost 30% over the last 90 days alone.

what do you guys think is going to happen in the UK grocery sector over the next 2-3 years?

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09-26-2014 , 10:59 AM

#20

steelhouse

banned

Join Date: Feb 2007 Posts: 6,109

Quote:

Originally Posted by ChipsAhoya

why not? next year's earnings estimates are down almost 30% over the last 90 days alone.

what do you guys think is going to happen in the UK grocery sector over the next 2-3 years?

Good chance management is working out inside deals with private equity. Thus they want to run price into the ground to get a good price for their buddies.

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09-26-2014 , 12:43 PM

#21

chezlaw

Limey Bastard

Join Date: Jan 2004 Posts: 46,910

Quote:

Originally Posted by ChipsAhoya

what do you guys think is going to happen in the UK grocery sector over the next 2-3 years?

Maybe not in the next 2-3 years but I think we will see a wave of store closures fairly soon and a big increase in deliveries and pick up, especially for in non-perishables.

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09-28-2014 , 08:11 AM

#22

ODUK

newbie

Join Date: Jul 2014 Posts: 41

Quote:

Originally Posted by ChipsAhoya

why not? next year's earnings estimates are down almost 30% over the last 90 days alone.

what do you guys think is going to happen in the UK grocery sector over the next 2-3 years?

Tesco is obviously a huge brand compared to other supermarkets which have been growing in the UK. I think it will be especially hard for these new supermarkets to break in and compete in online shopping. I think because of this Tesco is much more likely to recover than slip further under.

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09-28-2014 , 09:30 AM

#23

rwillia789

adept

Join Date: Mar 2010 Posts: 927

the online delivery angle is my main motivation for this "investment". tesco have the economies of scale to push it hard.

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09-28-2014 , 01:29 PM

#24

ChipsAhoya

2011 $10k Stud8 Champion

Join Date: Oct 2004 Posts: 6,890

Quote:

Originally Posted by ODUK

why? they don't have the costs of maintaining an existing large-format store base that the market is moving away from.

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09-29-2014 , 06:47 AM

#25

ODUK

newbie

Join Date: Jul 2014 Posts: 41

I assume you don't live in the UK? The stores who they have lost market share to are exactly the type of large-format store base that you're describing.
Some of them don't even have an online shopping, even the ones that do are no where near the quality of tesco/asda/sainsburys.

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