Broker backs grocers in battle against Amazon
Britain’s supermarkets were given a lift as Deutsche Bank put out a reassuring note on the future of the sector.
the major food retailers were hit this week after internet giant amazon started cutting prices at its newly acquired grocery group Whole Foods.
Many investors fear for the future of the food retailers as tech behemoths start to turn their attention to the sector. there is concern that supermarkets could suffer the same fate as many other high street stores, which have struggled to adapt their businesses and lower their prices to compete against online rivals.
Yesterday, Deutsche said that while the threat of online grocery retail was a challenge, it is ‘not terminal’. analysts at the bank reckon online grocery sales will peak in the next five years with a total market share of around 8pc.
rather than doing one ‘main’ weekly food shop, consumers increasingly do several smaller ‘convenience’ shops throughout the week. research has found shoppers tend to only go online for their main grocery shop.
Deutsche said supermarket stores also had cost advantages over online sellers, which must rent huge warehouse spaces and absorb the costs of distribution and delivery. the bank has a ‘sell’ rating on
Ocado (down 1.6pc, or 5p, to 304.8p) and a ‘buy’ on Tesco (up 1.2pc,or 2.2p, to 183.1p). UBs yesterday also raised its target price for tesco by 25p to 260p.
Elsewhere, Sainsbury’s edged up 0.2pc, or 0.5p, to 236.1p, as the
FTSE 100 nudged up 0.1pc, or 7.88 points, to 7438.50. it was a big day for Micro Focus, which completed its ‘audacious’ reverse takeover of Hewlett Packard Enterprise’s software business.
the move puts Micro Focus on course to become the UK’s biggest tech firm. Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘Prey has turned predator as, for once, a UK company looks overseas in an audacious takeover.
‘Micro Focus has form when it comes to buying up legacy businesses and the management team will now be looking to improve efficiency and margins.’
Chief executive Chris Hsu said the reverse takeover, where a smaller company buys a bigger one, was a ‘significant milestone’ for the group, which saw its market value climb top almost £10bn as it issued 222m new shares to Us investors. shares were worth 2264p at the close of trading.
in the second reverse takeover of the day engineering group
Avingtrans completed its takeover of Hayward tyler Group. the aim-listed manufacturer said its newly increased scale would help it make inroads into the nuclear energy market in China. shares fell by 0.6pc, or 1.5p, to 254.5p.
Foreign exchange rates and a strong gold price helped boost trading at Ramsdens Holdings.
the financial services provider and pawnbroker said it expects pre-tax profit this year to be significantly ahead of market expectations, and analysts at Liberum raised their target price for the stock by 28p to 190p.
ramsdens chief executive Peter Kenyon said the firm had seen strong trading across all of its divisions and would provide a further update in november. shares rocketed 16.7pc, or 24p, to 167.5p.
tech group Stadium climbed after it bought industrial power supply business PowerPax for £2.8m. Berkshire-based PowerPax, which recorded sales of £ 3.3m and pre- tax profit of £400,000 last year, is stadium’s fifth tech acquisition in as many years. stadium shares advanced 5.2pc, or 6.5p, to 132p.