Supermarkets face dismal Christmas unless they shape up, says Begbies Traynor
The UK's big supermarkets are facing a miserable Christmas and potential financial problems unless they sort out issues stopping them fighting off competition from discounters, insolvency experts Begbies Traynor said.
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The likes of Tesco, Sainsbury's, Morrisons and Wal-Mart's Asda need to eliminate problems such as supply chain disputes, inefficient legacy sites and poor financial management to better counter the challenge from Aldi and Lidl, Begbies said in its third quarter Red Flag Alert.
Begbies' partner and retail analyst Julie Palmer said: "These operational issues need to be fixed quickly to avoid the third quarter's poor performance turning into a depressed Christmas sales period."
Begbies also said the UK's food retailing industry experienced the sharpest increase in 'significant' financial distress of all sectors monitored, rising 11% over the past three months to 4,239 struggling businesses.
The sector's fortunes have deteriorated even further on an annual basis, with 'significant' financial distress increasing 53% from 2,766 last year.
Severe cases of 'critical' financial distress rose 23% over the last quarter, including seven large food retailers, categorised as businesses with more than 500 staff.
Of these, three are well-known household brands, all of which have incurred 'adverse financial actions' over the past quarter - typically showing that they are failing to pay some creditors until well beyond the agreed terms.
Adverse financial actions include county court judgements totalling more than £5,000 within three months.