It is no secret that the UK’s largest supermarket Tesco (LSE: TSCO) is struggling, and not only with accounting woes, which have seriously tarnished its media image, and frankly put off its loyal customers. So how will it do over the forthcoming festive period, along with the other “Big Four”?
The biggest threat to Tesco and the other “Big Four” supermarkets by a long mile are the discounters, Aldi and Lidl, who are snapping at their heels with cheaper prices and low-cost luxury food offerings. Back in 2009, Lidl launched a £5 lobster for the festive period; it has now launched a range of six live Pacific Oysters for £2.79 for this festive period.
That’s not all. Lidl is going to stock smoked reindeer slices, beef carpaccio, salmon caviar and its own-label champagne, Comte de Senneval over Christmas.
Tesco’s latest set of results would not fill anyone with festive joy. According to figures from retail researcher Nielsen, Tesco was the biggest sales faller of the “Big Four” supermarkets in the 12 weeks to 8 November, dropping 4.2% against the same period a year ago. Rival Morrisons (LSE: MRW) was the next biggest victim with a sales fall of 3%, while Sainsbury’s dropped 1.8% and Asda slipped 0.8%.
In contrast, Aldi’s sales leapt 21.4%, Lidl rose 23.3% and Waitrose rose 6.9%. Marks & Spencer (LSE: MKS) even managed to squeeze a 1.8% rise. Nielsen predicts a drop in grocery sales for the final quarter of 2014 of between 0.5% to 1% against a year ago.
There also might be a possible rights issue announcement for Tesco in the near future, with its shares also down 51% on the year compared to only 4% from the FTSE 100, analysts remain somewhat negative. No full-year guidance has been given either from Tesco, and its dividend has been cut.
In contrast, rival Morrisons is doing slightly better, and could be grabbing potential income-seeking investors under the mistletoe for a kiss with its attractive current dividend yield of 7.5%. But it too still has a long way to go to beat off those pesky discounters. Morrisons has been described by one analyst as a “jam tomorrow” stock, as it is in the middle of a three-year plan that aims to eliminate the current loss of sales and market share.
On to joyous M&S. The supermarket recently had a surge in share price after the announcement of its latest set of results, which showed an uplift in food sales. Like Morrisons, it also offers an attractive dividend yield of 4.2% for those investors hungry for income. M&S also remains confident that it will ride out the impending Christmas period and come out tops.
