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British supermarkets

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Nimrod103
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British supermarkets

#447603

Postby Nimrod103 » October 3rd, 2021, 11:09 pm

I have been following the Morrisons saga with interest, not because I hold the stock (unfortunately), but I do hold Tesco and Sainsburys. Does the bidding frenzy indicate that there is more value in British supermarkets than I thought? I had really written off the sector as low margin and poorly profitable, especially with increasing competition from Aldi and Lidl. Or are there special circumstances about Morissons, which make it very much more attractive to bidders?

UncleEbenezer
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Re: British supermarkets

#447613

Postby UncleEbenezer » October 3rd, 2021, 11:45 pm

Isn't the attraction of Morrisons at least in part the freehold property portfolio? A plausible outcome now is that they play financial engineering with that, take the money and run. In the worst case, leaving Morrisons itself a burnt-out husk loaded with debt at 19% interest to the proprietor's Cayman Islands subsidiary.

Of course far better outcomes are also plausible. Speaking personally, as someone for whom Morrisons is the only bigger supermarket within shopping-in-person range, I certainly hope for one! Maybe for example they can improve profitability by sorting out the kind of glitches that prevented me using them for online shopping?

It's not obvious that any of that applies to other supermarkets, but who knows what else might be found therein?

WickedLester
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Re: British supermarkets

#447622

Postby WickedLester » October 4th, 2021, 5:53 am

UncleEbenezer wrote:Isn't the attraction of Morrisons at least in part the freehold property portfolio? A plausible outcome now is that they play financial engineering with that, take the money and run. In the worst case, leaving Morrisons itself a burnt-out husk loaded with debt at 19% interest to the proprietor's Cayman Islands subsidiary.

Of course far better outcomes are also plausible. Speaking personally, as someone for whom Morrisons is the only bigger supermarket within shopping-in-person range, I certainly hope for one! Maybe for example they can improve profitability by sorting out the kind of glitches that prevented me using them for online shopping?

It's not obvious that any of that applies to other supermarkets, but who knows what else might be found therein?


I agree, it's the huge property portfolio that PE is interested in whatever they say. I can see another Debenhams in the making.

Dod101
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Re: British supermarkets

#447628

Postby Dod101 » October 4th, 2021, 7:48 am

WickedLester wrote:
UncleEbenezer wrote:Isn't the attraction of Morrisons at least in part the freehold property portfolio? A plausible outcome now is that they play financial engineering with that, take the money and run. In the worst case, leaving Morrisons itself a burnt-out husk loaded with debt at 19% interest to the proprietor's Cayman Islands subsidiary.

Of course far better outcomes are also plausible. Speaking personally, as someone for whom Morrisons is the only bigger supermarket within shopping-in-person range, I certainly hope for one! Maybe for example they can improve profitability by sorting out the kind of glitches that prevented me using them for online shopping?

It's not obvious that any of that applies to other supermarkets, but who knows what else might be found therein?


I agree, it's the huge property portfolio that PE is interested in whatever they say. I can see another Debenhams in the making.


The difference being that Morrisons sells stuff that people actually want to buy,

Dod

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Re: British supermarkets

#447641

Postby Gerry557 » October 4th, 2021, 9:24 am

Nimrod103 wrote:I have been following the Morrisons saga with interest, not because I hold the stock (unfortunately), but I do hold Tesco and Sainsburys. Does the bidding frenzy indicate that there is more value in British supermarkets than I thought? I had really written off the sector as low margin and poorly profitable, especially with increasing competition from Aldi and Lidl. Or are there special circumstances about Morissons, which make it very much more attractive to bidders?


The phase "bidding fenzy" made me laugh. I think it added a penny or so.

I bought into MRW as it was a property company with a side line called a supermarket. It also has a bit more, means of production etc.

I dont see a read through into other supermarkets. I see TSCO is slowly increasing its free holdings after finding selling and lease back doent really work.

Sadly I think MRW is going to be dragged out of my sticky mits and dont think it will be run for the better. I suspect most promises will be whittled down over time. Pity as it was just getting back on its feet and things were starting to look up again. I cant see my vote stopping this though.

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Re: British supermarkets

#447865

Postby stockton » October 4th, 2021, 8:18 pm

Surely the real jewel should be Argos which ought to be a significant competitor to Amazon.

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Re: British supermarkets

#447879

Postby WickedLester » October 4th, 2021, 9:03 pm

stockton wrote:Surely the real jewel should be Argos which ought to be a significant competitor to Amazon.


Isn't Argos already owned by Sainsburys?

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Re: British supermarkets

#447883

Postby stockton » October 4th, 2021, 9:12 pm

WickedLester wrote:
stockton wrote:Surely the real jewel should be Argos which ought to be a significant competitor to Amazon.


Isn't Argos already owned by Sainsburys?

Yes. Which is why I mentioned them.

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Re: British supermarkets

#447912

Postby UncleEbenezer » October 4th, 2021, 11:18 pm

If they could just restore Argos to where it was in 2005[1] - smooth, easy online ordering, and efficient, reliable first-thing-next-morning delivery, it would be a huge improvement.

These days it's a nightmare. Keeps telling me whatever I'm trying to order isn't available for delivery to me, but only late in the process. Not being an Amazon fan, I've taken to using Wayfair as my default online supplier for most of the kind of things I'd once have bought from Argos.

So there's low-hanging fruit for Sainsburys management to improve things. Another huge improvement would be to combine deliveries, so I could order from Argos alongside my Sainsburys online shopping and get it all in the same delivery.

So come on Private Equity, you could do us a real favour and improve profits by managing Sainsburys better!

[1] 2005 being when I moved from a furnished flat to an unfurnished one, and placed several substantial orders with Argos for basics to equip the new place. I still have most of those purchases, with the exception of the fridge-freezer and washing machine that have died.

Nimrod103
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Re: British supermarkets

#447941

Postby Nimrod103 » October 5th, 2021, 8:38 am

UncleEbenezer wrote:If they could just restore Argos to where it was in 2005[1] - smooth, easy online ordering, and efficient, reliable first-thing-next-morning delivery, it would be a huge improvement.

These days it's a nightmare. Keeps telling me whatever I'm trying to order isn't available for delivery to me, but only late in the process. Not being an Amazon fan, I've taken to using Wayfair as my default online supplier for most of the kind of things I'd once have bought from Argos.

So there's low-hanging fruit for Sainsburys management to improve things. Another huge improvement would be to combine deliveries, so I could order from Argos alongside my Sainsburys online shopping and get it all in the same delivery.

So come on Private Equity, you could do us a real favour and improve profits by managing Sainsburys better!

[1] 2005 being when I moved from a furnished flat to an unfurnished one, and placed several substantial orders with Argos for basics to equip the new place. I still have most of those purchases, with the exception of the fridge-freezer and washing machine that have died.


Yes, Sainsburys really looks to me like it has lost its way, and the management need a real shakeup. My local store should be running rings around Lidl and Aldi, but is clearly badly run and organized, with few new ideas.

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Re: British supermarkets

#469778

Postby westmoreland9 » January 2nd, 2022, 7:51 pm

WickedLester wrote:
UncleEbenezer wrote:Isn't the attraction of Morrisons at least in part the freehold property portfolio? A plausible outcome now is that they play financial engineering with that, take the money and run. In the worst case, leaving Morrisons itself a burnt-out husk loaded with debt at 19% interest to the proprietor's Cayman Islands subsidiary.

Of course far better outcomes are also plausible. Speaking personally, as someone for whom Morrisons is the only bigger supermarket within shopping-in-person range, I certainly hope for one! Maybe for example they can improve profitability by sorting out the kind of glitches that prevented me using them for online shopping?

It's not obvious that any of that applies to other supermarkets, but who knows what else might be found therein?


I agree, it's the huge property portfolio that PE is interested in whatever they say. I can see another Debenhams in the making.


morrison's was attractive as it owned 86% of the freeholds, and had very low debt. it was very, very under geared. the valuation of the property portfolio also hadn't been updated to take into account the explosion of investor interest in the freeholds (supermarket income reit etc).

Sainsbury's has much lower freehold ownership. it is a very low return business. the share price also wasn't as bombed out as morrisons was. apollo had a look, but probably decided the share price was too high to make the numbers work. they've been increasing freehold ownership, and financial debt is low, which is a positive. the negative is they are locked into many long, onerous (RPI linked) leases.

the same applies to tesco, which is a superior business, but the share price has rerated and it is no longer a lowly rated share like morrisons was.


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