Bolstering Online Measures Help UK’s Big Four Supermarkets in Countering Retail Discounters

  • May 28, 2020 BST
  • Team Kalkine
Bolstering Online Measures Help UK’s Big Four Supermarkets in Countering Retail Discounters

High-street retail in the UK remained closed with the imposition of the lockdown in the country to contain the spread of the deadly coronavirus. Thankfully, supermarkets and grocery & food retailers were up and running during the lockdown induced by the pandemic. The UK government is leaving no stone unturned to contain the reproductive rate (R) in the range of 0.5 to 0.9. The virus has already claimed more than 37 thousand lives in the UK.

According to industry experts, the online Food & Drug retailers are likely to strengthen amid phased lockdown easing as well, as consumers would take time to regain confidence for visiting stores amid safety concerns with reference to the novel coronavirus. As fears of catching Covid-19 still exists, conventional retailers have ramped up online operations to serve millions of shoppers.

As per the data from the Office for National Statistics (ONS), the UK Supermarkets witnessed a strong surge in the volume of sales at 10.3 per cent. In addition, in March 2020, online sales as a percentage of retail sales made a new high of 22.3 per cent.  The development is visible not only on the big supermarkets who have done robust business but on their fierce competitors, the retail discounters.

Aldi and Lidl, the discounters of UK, are known for limited items in terms of a range of products which are available. In the pre-Covid era, the discounters flourished on best price offering. The discounters were able to reduce costs in the pre-pandemic era by opening stores for limited hours. They offered a limited range of products in comparison to conventional retailers. The discounters tried to attract consumers to store by offering exciting offers; also they were offering products in smaller packages.

In the present scenario, Aldi and Lidl are at disadvantages position, with the imposition of lockdown. They were already working on cost-saving efforts and working with a lower profit margin as the sales volume was high. However, in the present situation, they were having lesser number of delivery slots in comparison to bigger competitors with big pockets. Also, the discounters have a limited product range. People, as of now are considering bulk buying rather than smaller packages as everybody wants to save on costs. Therefore, conventional retailers have a slight edge over the discounters in the UK.

Let us discuss the performance of some major supermarkets of UK

  • Tesco Plc (LON: TSCO)

According to its Covid-19 update, the Group has increased its Grocery Home Shopping capacity by 20 per cent along with adding 145,000 slots in the last two months. In addition, the company added drivers, vans, and pickers. As most of the retailers witnessed stockpiling, the company placed a limit of 3 per item, which is now removed as the buying pattern of people have returned to normal.

As the UK prepares for lockdown easing, the company has introduced social distancing measures in stores and is promoting cashless payments. The Group’s operating profit (excluding exceptional items) was up by 13.5 per cent year on year in FY20. The net debt of the company was down by 8.4 per cent during the fiscal year 2020. The company’s annual dividend for FY20 increased by 58.6 per cent year on year in FY20.

On 28th May 2020, at the time of writing (before market close, GMT 01:15 PM), Tesco Plc shares were slightly up by 1.23 per cent against its previous day closing price, trading at GBX 231.20. The pandemic struck the markets in the last week of February. The TSCO shares created a new bottom at GBX 203.70 on 23rd March. Since then the stock has returned a price return of 12.13 per cent. The annual dividend yield of the company stood at 4.01 per cent.

  • Ocado Group Plc (LON: OCDO)

The Online British retailer delivers to over 6,000 more households weekly during the unprecedented crisis. Ocado Group has ramped up capacity and is at their best efficiencies. The company recorded a growth of 40.4 per cent in the Second Quarter to date of 2020 as compared to the prior year. Due to prevalent uncertainties amid the pandemic, the number of items per basket continues to hover around all-time high. The company claims to offer the best price against its competitors.

Currently, the company is processing 110 thousand standard sized orders per week against the first quarter of 2020. During the period, the group has attained a landmark, with the delivery of the first international customer fulfilment centres (CFCs) to the international partners Sobeys and Groupe Casino. Overall, the company maintains decent liquidity and position with cash of £1.2 billion.

On 28th May 2020, at the time of writing (before market close, GMT 01:21 PM), Ocado Group Plc shares were slightly up by 0.74 per cent against its previous day closing price, trading at GBX 2,052. The pandemic struck the markets in the last week of February. The OCDO shares created a new bottom at GBX 994.01 on 12th March. Since then the stock has returned a price return of 104.93 per cent.

  • WM Morrison Supermarkets Plc (LON: MRW)

During the lockdown, Morrison doubled its delivery slots. The company also launched click and collect service at nearly 300 stores. In addition, the Group had set up telesales service for the elderly and vulnerable customers who are not comfortable with placing online orders.

The company’s statutory profit before tax was up by 43.6 per cent year on year basis to £435 million in the fiscal year 2020. The company’s full-year total dividend stood at 8.77 pence per share in the financial year 2020.

On 28th May 2020, at the time of writing (before market close, GMT 01:43 PM), WM Morrison Supermarkets Plc shares were up by 2.67 per cent against its previous day closing price, trading at GBX 186.40. The MRW shares created a new bottom at GBX 157.55 on 17th March. Since then the stock has returned a price return of 15.23 per cent. The annual dividend yield of the company stood at 3.73 per cent.

  • J Sainsbury Plc (LON: SBRY)

The company used bicycles to transport essential items to bolster its delivery service during the Coronavirus outbreak from a closed convenience store in London. The company has increased the weekly delivery slots by 50 per cent and strives to deliver 600,000 slots each week. The company also recruited a large number of drivers to cater to the surge in demand during the unprecedented crisis. The company witnessed a stronger cash generation with retail free cash flow, which was up by 34 per cent year on year to £611 million.

On 28th May 2020, at the time of writing (before market close, GMT 02:03 PM), J Sainsbury Plc shares were up by 3.71 per cent against its previous day closing price, trading at GBX 193. The SBRY shares created a new bottom at GBX 171.19 on 17th March. Since then the stock has returned a price return of 8.71 per cent. The annual dividend yield of the company stood at 5.31 per cent.

 


Disclaimer
The website https://kalkinemedia.com/uk is a service of Kalkine Media Ltd, Company Number 12643132. The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) or engage in any investment activity under discussion. We are neither licensed nor qualified to provide investment advice through this platform.

 

With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities. 

Amidst this, are you getting worried about these falling interest rates and wondering where to put your money?

Well! Team Kalkine has a solution for you. You still can earn a relatively stable income by putting money in the dividend-paying stocks.

We think it is the perfect time when you should start accumulating selective dividend stocks to beat the low-interest rates, while we provide a tailored offering in view of valuable stock opportunities and any dividend cut backs to be considered amid scenarios including a prolonged market meltdown.

To know more about these dividend stocks, click here

CLICK HERE FOR YOUR FREE REPORT!
   
x
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK