COMMENT: Trouble in store | Cameron fall-out

Martin Flanagan
Martin Flanagan
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SUPERMARKETS are becoming an unloved stock market sector. The plethora of bad news from Britain’s major food retailers just keeps on coming in a sort of twisted version of the industry’s trademark Bogof – buy one, get one free – offers. Now it seems a case of endure one crisis, get one free.

Sainsbury’s yesterday cut its annual sales forecast and said it would review its dividend as part of a wider review of the business under new chief executive, Mike Coupe.

In a sign of just how competitive the sector has become with the rise of the discounters Aldi and Lidl, Sainsbury’s said it now expected second-half sales to fall by a similar amount to the 2.1 per cent fall in the first half.

Previously it had forecast a small rise in sales over the full year. Given that Sainsbury’s had recorded nine consecutive years of sales growth before seeing sales now fall in the past three quarters, it sent shivers through the whole sector. Compounding the sense of gloom, the Financial Conduct Authority announced it was formally investigating the Tesco accounting scandal. With Morrisons also facing its own strong sales pressures, it is almost a case of each bit of bad news not just affecting the relevant supermarket group but also infecting its rivals.

Sainsbury’s shares touched a six-year low yesterday, Tesco shares were at their lowest level since 2003, and Morrisons fell 5 per cent.

It has got to the stage where the battered sector looks to some as just not worthy of serious investment consideration. The industry is caught in a pincer movement of cyclical challenge – austerity, deflation, etc – and systemic change in both the way, and where, people shop for their food.

For stock-pickers, the sector looks one to avoid for the foreseeable future.

Cameron sets out stall, but stand-off looms

A GENERALLY positive business response to David Cameron’s speech at the Tory conference, but with a significant fly in the ointment. The PM was obviously talking to the converted in pledging the UK would maintain the lowest corporate taxation rate in the G20.

Similarly, his promise to lift one million people out of tax if a Conservative government is elected to make it worth the while of more people to get off benefits and go to work.

But I believe in the run-up to a referendum on European Union membership in 2017, a re-elected Cameron would face dogged resistance from Britain’s big businesses, in particular, to his pledge to alter the bloc’s freedom of movement rules to curb intra-EU immigration.

He knows this plays well with a large slice of the British electorate, but I believe – as in the Scottish referendum – that we would see business become a lot more vocal against such a change as an EU vote approached.