Broker snap: Jefferies updates grocers with Morrison and Tesco picked

22nd Oct 2013 13:27

Jefferies' European Retail Team noted that demand in the grocery industry has remained weak overall, although Morrison has strengthened and Sainsbury's remains "the winner".With demand "weak" and grocery industry growth having remained "pedestrian" in the four weeks to October 13th, total till roll sales grew by 1.8%, down from 2.1% in the previous period. Performance for the Big 4 as a group weakened to 1.3% from 1.8%.Within this group, the broker said the quality operators have seen steady sales growth in the mid-single-digits and the discounters have delivered sales growth in the mid-teens, with Aldi delivering another month of 30%-plus growth for the fifth period in a row.Sainsbury continues to lead the pack despite facing the toughest comparable and remains a 'hold'. "Cash sales growth of 3.1% leads the UK majors and is helped by a stellar performance in general merchandise with growth of 6.6%", though the broker noted stores were running aggressive reductions on clothing of late.Tesco, on which the broker is maintaining its 'buy' stance, continued in its recent pattern with poor non-food and better food. Once again this mix meant that Tesco delivered the lowest sales growth of the UK majors at just 0.3%. Morrison, also a 'buy', has seen improved momentum helped by softer comparables and more store space. Cash sales growth was up 2.5%, with food ahead of non, but Jefferies "mindful of the softer comparable and increasing contribution from new convenience store space coming on stream".ASDA was hit by non-food dilution during the four weeks, with sales growth was similar to Tesco at just 0.4% as non-food declined by 0.9% and food grew by 0.8%.OH