Stocks to watch as supermarket inflation soars: Kalkine Media explores

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Highlights:

  • Supermarket inflation touched a record high of 12.4% in July.
  • Amid the grocery inflation, supermarkets are trying to add value for the customers through the expansion of their own-label varieties.

Amid the rising cost pressures, supermarket inflation touched a fresh high of 12.4% last month. This has increased the average annual bills of households by £571, while they are hit by some of the greatest price hikes for milk and butter.

According to the market research firm Kantar, the average household grocery bills have gone up from £4,610 to £5,181 on a yearly basis. In the four weeks to 4 September, there have been hikes of 31%, 29% and 25% in the prices of milk, dog food, and butter, respectively, as compared to the previous year.

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This year, sales of the exceptionally cheap own-label items surged by a third due to consumers battling with the rising cost pressures and attempting to survive the ongoing turmoil. Over the four-week span, there was an increase of £393m in the overall spending on all retailers' own-label lines. This rise has lifted the own label's market share to 51.1%.

The rapidly rising costs of food and drinks don’t seem to be stabilizing anytime soon. Supermarkets are thus acknowledging the grocery inflation and trying to add value for the customers, especially through the expansion of their own-label varieties.

As grocery inflation is on the rise, UK investors can explore the following London-listed supermarket stocks.

Tesco plc (LON: TSCO)

The market cap of the global retailer of groceries and general merchandise, Tesco plc, stands at £18,860.96m as of 13 September. The FTSE 100 constituent at present has an EPS (earnings per share) of 0.19 with a P/E ratio of 12.22. At present, the company is offering a yearly dividend yield of 4.5%. TSCO shares were trading at GBX 245.10, tumbling by 3.16%, at 2:00 PM (GMT+1) on Tuesday. The stock's returns for the past 12 months and on a YTD (year-to-date) basis stand in the negative territory as of 13 September, at -3.66% and -15.45%, respectively.

J Sainsbury plc (LON: SBRY)

The market cap of the second biggest group of supermarkets across the UK, J Sainsbury plc, stands at £5,003.31m as of 13 September. The FTSE 100-listed company holds an EPS of 0.30 and a P/E ratio of 7.03. At present, the company is offering a yearly dividend yield of 6.5%. SBRY shares were trading at GBX 202.20, dropping by 2.44%, at 2:03 PM (GMT+1) on Tuesday. The company's returns to shareholders on a 12-month and YTD basis stand in the negative territory as of 13 September, at -29.23% and -24.51%, respectively.

Marks and Spencer Group plc (LON: MKS)

The market cap of the British retailer operating across the globe, Marks and Spencer Group plc, stands at £2,488.43m as of 13 September. The FTSE 100-listed retailer's EPS stands at 0.16, and the P/E ratio is at 7.79. MKS shares were trading at GBX 122.80, plunging by 3.20%, at 2:06 PM (GMT+1) on Tuesday. The stock's returns on both 12-month and YTD basis stand in red as of 13 September, at -34.65% and -47.15%, respectively.

Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.


 

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