Analysts believe that the UK supermarket trade could be hit by the economic downturn according to the Telegraph.
With Tesco’s figures due out on Tuesday and Sainsbury’s on Wednesday, many are saying that they expect the results to be ‘flattish’ if not a slight drop. Maybe Sir Terry Leahy got out of Tesco at the right time?
Despite this UK supermarkets are still seen as good defensive stock for investors as people will always need access to affordable food and day to day items even in the worst of economic downturns.
In recent years supermarkets have been used to good steady growth of 4-8%. But now, as an example, Merrill Lynch says to expect 1% growth this year with ‘sub-par’ growth in 2011. Merrill Lynch does say though that although it’s going to be a hard time for the supermarkets they will still be a good value investment.
The consumer has been told to expect tough times so will now shop accordingly. But a recent easing in the price of fuel and the excitement around the football world cup may give some temporary reprieve.
Now if these giants are beginning to feel the pinch one wonders what sort of state the more upmarket stores and niche shops are in. Especially as these large chains have now entered the arena of cheap clothing and other household goods.