... and the supermarkets should take note as profits fall by £2.5bn
everyday low-price structure, slammed confusing and ambiguous promotions last week when he said: ‘What I say to my team is “Can you explain it to your mother and would you be proud of the offer you gave her?”’
Research by retailer analyst Bruno Monteyne at stockbroker Bernstein indicates there has been a surge of promotional activity in recent years. Asda and Morrisons offered about 20 per cent of their ranges on promotion or discount five years ago. This had risen to 30 per cent this year.
But the industry average suggests that there are signs that supermarkets have cut back slightly from 26 per cent of products on discount last year to 25 per cent this year. The move has apparently been led by Tesco which cut promotions to 23 per cent of products this year from 25 per cent in 2014. week accused of ripping customers off to the tune of hundreds of millions of pounds with myriad discounts, offers and vouchers.
Consumer watchdog Which? said it has lodged a supercomplaint with the Competition and Markets Authority over ‘dodgy multi-buys, shrinking products and baffling sales offers’.
Sainsbury’s, for example, offers a combination of Nectar Card loyalty points, money-off vouchers to tempt both regular and lapsed shoppers, discounts, multi-buy offers and Price Match tokens.
The complaint comes at a time when some supermarkets, including Tesco, say they are reexamining their pricing structures in an effort to win shoppers back.
Tesco chief executive Dave Lewis, who appears to be moving towards a more transparent, BRITAIN’S supermarket giants are heading for another year of pain with profits expected to plummet to just a quarter of historic levels as shoppers cut back or switch between retailers to find the best deals.
The combined profit of the big three UK-listed supermarkets – Tesco, Sainsbury’s and Morrisons – is expected to shrink to less than £1billion over the coming year, according to some City analysts.
Analysis by The Mail on Sunday shows that trading profit at the trio’s UK businesses, which has been measured on an underlying basis by stripping out one-off costs such as Tesco’s historic £4.7billion property writedown announced last week, hit a high of more than £4billion in 2012.
Trading profit is considered the best reflection of the underlying health of a retail business and its ability to attract shoppers and survive in the future. One-off costs, many of which reflect recalculation of the value of assets not actual losses, can obscure the future potential.
Profits are not expected to show signs of recovery until 2017 at the earliest, according to the research based on City forecasts.
Shrinking profits are bad news for supermarkets and their shareholders but the situation could allow them to argue that recent complaints they are ripping off shoppers are wide of the mark.
Some analysts believe that Tesco’s UK profit could slump to zero this year while Morrisons and Sainsbury’s stagnate. Other rivals including Asda, Waitrose and the Co-operative group have also been hit as a consequence of the price war which erupted last year.
The supermarkets were last