UK Grocers: TSCO LN, SBRY LN, MRW LN

J Sainsbury PLC

Consumer


Presented:02/06/2015
Price:£2.70
Cap:N/A
Current Price:£2.77
Cap:$9.92B

Presented

Date02/06/2015
Price£2.70
Market CapN/A
Ent ValueN/A
P/E Ratio17633.33x
Book Value£2.89
Div YieldN/A
Shares O/S1,912.15M
Ave Daily Vol10,800,000
Short IntN/A

Current

Price£2.77
Market Cap$9.92B
J Sainsbury plc, together with its subsidiaries, engages in the grocery and related retailing activities in the United Kingdom. The company operates through three segments: Retailing, Financial services, and Property investments. It operates a range of store formats, including convenience and supermarkets that offer various food and non-food products and services. The company also operates online grocery and general merchandise operations. It operates approximately 1,203 supermarkets and convenience stores. In addition the company holds interests in freehold and long leasehold properties. Further, it provides insurance, credit cards, savings, and loans; energy efficiency advice for its customer’s homes; and a selection of movies, music, books, games, and other entertainment products. The company was founded in 1869 and is headquartered in London, the United Kingdom.

Publicly traded companies mentioned herein: Tesco PLC (TSCO LN), J Sainsbury PLC (SBRY LN), WM Morrison Supermarkets PLC (MRW LN), Wal-Mart Inc (WMT), Woolworths Ltd (WOW AU)

Highlights

Privately held German discounters Aldi and Lidl have been growing faster than the big UK grocers, and “are capturing in excess of 100% of the market growth in the UK,” said the presenter (Presenter 1). He does not see this trend stopping, or decelerating any time soon, and is short the three publicly traded UK grocers: Tesco, Sainsbury and Morrisons. Another participant (Presenter 2) agreed with the overall bear thesis and presented his negative outlook for Morrisons as well. The presenters agreed that Aldi and Lidl are clearly appealing to UK consumers in a way that the traditional grocers cannot, and there is a long runway for both to grow. Citing 2014 market share data, the UK is the least penetrated discount market in Europe (just 7.7%)], and traditional grocers’ growth has already decelerated y-o-y every year since 2011 (average -2.2% in 2014). While the story has already started to play out, the entry point appears to be attractive following a bounce in UK grocers’ share prices (up 15-20% from recent lows) following strong Holiday season sales.

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Idea Discussion

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