Changing consumer behaviour hits UK supermarkets

Some of Britain’s top companies could see profits fall by more than a third, and it is all caused by the way consumer behaviour is affecting supermarkets according to a study of new figures.

The Share Centre compiled and analysed quarterly results that revealed like-for-like pre-tax profits for the FTSE 350 were down nearly 37% in the first quarter of the financial year.

Shopping

The Share Centre's Helal Miah said: “UK plc is struggling to reach escape velocity. FTSE 100 companies have been assailed by wave after wave of global difficulties that have knocked profits."

“First the financial crisis hit the banks, then commodity prices began to fall, followed by the impact of a strong pound hitting profits, and then lower oil prices. The price war in the supermarket industry is just the latest in the long succession of difficulties to hit the UK’s largest stocks,” he explained.

Over the past 12 months, the supermarket sector has seen major established retailers battling to save market share from slipping over to relative newcomers Aldi and Lidl.

While total FTSE 350 revenues were down 0.4pc on a like-for-like basis, listed food retailers’ profits were down 62% in the first quarter.

In all, supermarket sales dropped by £2.3bn, hitting famous names such as Tesco, Sainsbury’s and Morrisons the hardest.

Bottom line

The ratings agency Moody’s believe that the UK economy will see a further 18 month period of falling food prices and that none of the big three supermarkets “really has the capacity to engage in many more rounds of price cuts.”

Supermarkets are now using a mixture of restructuring and cutbacks that has seen Tesco scrap plans for more than 60 new store openings, while Sainsbury’s is looking at new uses for out-of-town stores. Meanwhile, Morrisons is calling upon a new senior executive team to bring about changes.