|Bid||216.90 x 0|
|Ask||217.10 x 0|
|Day's Range||215.50 - 219.50|
|52 Week Range||177.05 - 20,130.00|
|Beta (3Y Monthly)||0.77|
|PE Ratio (TTM)||120.67|
|Earnings Date||Nov 7, 2019|
|Forward Dividend & Yield||0.11 (5.09%)|
|1y Target Est||317.00|
(Bloomberg Opinion) -- It’s the worst nightmare of supermarkets and food delivery firms alike: Amazon.com Inc. turbocharging its grocery business with a network of couriers who can have grub on your doorstep within an hour.So you can see why Britain’s competition regulator has decided to challenge the e-commerce giant’s planned investment in Deliveroo, the U.K. rival to UberEats. The Competition and Markets Authority needs to tread carefully, though, as denying the funds to Deliveroo might inadvertently make it less able to compete in the food delivery business. That would be an unfortunate outcome.Back in May, Deliveroo announced a $575 million funding round led by Amazon. On Wednesday, the CMA determined that the investment might hurt competition in U.K. food delivery. It has given the companies five days to offer remedies, and it will launch a deeper probe if they don’t.The CMA’s concerns are warranted. While Amazon shuttered its British restaurant delivery operations last year, it remains interested in the market. The Deliveroo investment is a way of staying in the game; the American company is no doubt interested in the British business’s tens of thousands of riders. The two are also rivals in grocery deliveries, so forging a closer alliance would discourage them from competing. That’s a risk for delivery rival Ocado Group Plc and supermarket chains such as J Sainsbury Plc and Tesco Plc.A lengthy CMA investigation might be a problem, though, because of Deliveroo’s pressing capital requirements. A probe probably wouldn’t complete until the second quarter of next year, according to Bloomberg Intelligence analyst Aitor Ortiz. By then Deliveroo will have waited a year to receive its investment. If previous form is a guide, it needs that money. In 2018 Deliveroo burned through almost 200 million pounds ($263 million) of cash. If it has been spending at a similar clip this year, it might be nearing the bottom of its pile.There are plenty of remedies that might be acceptable to the CMA: An assurance from Amazon that it won’t try to buy Deliveroo for five years; a pledge not to integrate delivery services; and Amazon refraining from taking a board seat. If such concessions remove Amazon’s rationale for the investment, then it should back out. At least that would give Deliveroo an earlier opportunity to find different funding.The CMA will have one eye on what happened recently in the German food delivery market, where Takeaway.com NV acquired the local businesses of Delivery Hero SE, giving it more than 90% market share. But it can afford a degree of lenience in this case. It could still block any merger, should that materialize. Delaying Deliveroo’s access to funds would probably hold the company back in its market scrap with UberEats and Just Eat Plc.Regulators have been poor at anticipating the market-cornering impact of deals in the past, most famously Facebook Inc.’s acquisition of Instagram and Google’s $3.2 billion purchase of DoubleClick. Scrutinizing Amazon is right and proper, and a commitment not to integrate Deliveroo’s courier network would be a fair condition. But unless a full merger is on the table, the CMA mustn’t overdo things.To contact the author of this story: Alex Webb at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Indeed, despite huge regulatory efforts in the UK to make it easier to switch banks to take advantage of new competition, customers remain stubbornly attached to the accounts they opened as young adults. All the more so now that incumbents from NatWest to Barclays have raised their game when it comes to digital and mobile services, copying or buying start-ups that offer customer-oriented techniques. The risk for challengers is that, having played their part in getting the industry to improve the customer experience and service, they might end up with very little to show for it.
(Bloomberg Opinion) -- Selling Tesco Plc’s operations in Thailand and Malaysia for about 7 billion pounds ($9.2 billion) would be a nice parting present from outgoing Chief Executive Officer Dave Lewis to his successor Ken Murphy. But there could be a sting in the tail from such a lavish gift. Tesco would be even more focused on its home turf in the U.K., where it’s in a merciless battle with discounters from Germany.Tesco said on Sunday that it was carrying out a strategic review of the business, after receiving interest from potential buyers. Britain’s biggest supermarket is right to consider whether its remaining Asian operations might be worth more to a rival. Analysts at Bernstein estimate the Thai and Malay businesses could fetch between 6.5 billion pounds and 7.2 billion pounds. What’s more, with Bernstein estimating of typical transaction multiples in the region of about 13 times Ebitda, and Tesco currently trading on an enterprise value to Ebitda multiple of 7.6 times, then this unit isn’t being adequately reflected in Tesco’s valuation.The Asian business is a highly profitable one, with an underlying operating margin of 5.87% in the year to February 2019, close to twice that at both Tesco’s U.K. and central European divisions. Selling this arm would be a further retrenchment from Tesco’s international assault of the 1990s, and leave the company focused on its core retail operations in the U.K. as well as its bank in its home market. Its only overseas outpost would be central Europe, a business it would most likely love to sell if a buyer could be found.Tesco doesn’t need to offload assets to strengthen its balance sheet, in contrast to when it parted company with its South Korean business in 2015. It has been bringing down debt, enabling it to raise its dividend and generating hopes that it may soon begin returning cash to shareholders. A chunky price for the Thai and Malay units would make this even more likely. Indeed, the shares rose about 5% on Monday as investors salivated over a sizable buy-back or special dividend.It would also provide Murphy with a war chest to slash prices. He joins Tesco from Walgreens Boots Alliance Inc., where he spearheaded an expansion in China. However he has no direct experience of the cutthroat U.K. grocery sector. Pricing is one area where Lewis could have done more. Although he made Tesco more competitive with its suite of cheaper exclusive brands, he could have tackled the problem earlier in his tenure.With the disposal proceeds, Murphy would be able to move quickly. He needs to. The U.K. arms of the German discounters Aldi and Lidl continue to go from strength to strength, improving their premium offerings and moving into high-margin areas for the mainstream supermarkets, such as vegan food. Being able to more effectively fight the no-frills supermarkets would be helpful to the new CEO.He would also be able to put pressure on traditional supermarket rivals, such as as J Sainsbury Plc, Wm Morrison Supermarkets Plc and Walmart Inc.’s Asda, at a time when the grocery market is sluggish. Meanwhile, some of the proceeds could be used to beef up other areas of Tesco, such as its online operations and its cash and carry arm Booker.But prices on the shelves of its domestic supermarkets are the key driver of the retailer’s fortunes. And with an attractive Thai and Malay deal, it might just be able to get them right.To contact the author of this story: Andrea Felsted at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- This Christmas, instead of a free-range turkey, how about a beef-less Wellington washed down with a few glasses of “Nosecco”? And rather than falling asleep watching the Queen, why not tune in to your inner self with a spot of meditation?This might not sound like traditional festive fun, but now that the craze for all things vegan has crossed the Atlantic, it’s what British retailers are betting on to lift sluggish supermarket sales and see off brutal conditions on the high street, at least for a spell.A rough estimate suggests that across the big U.K. supermarket chains, meat-free offerings of traditional Christmas fare are up by between 40% and 400% this year. This underlines how veganism has moved from niche to mainstream over the course of 2019 as more consumers cut out animal products altogether, or reduce their meat intake with a “flexitarian” diet. Just look at the popularity of the vegan sausage roll introduced by baker Greggs Plc. There’s likely to be at least one vegan at any big Christmas gathering, and so being able to cater for them with plant-based canapés is crucial. And while many families won’t ditch the turkey altogether, they may well replace another meat protein, such as beef or gammon, with a fancy nut roast, savory yule log or vegetable wreath. Sales of plant-based substitutes still represent a small share of the overall grocery market, but they can have a significant influence over shopping habits. Being able to buy a good selection of food for a vegan daughter, for example, is likely to determine where shoppers fill up their grocery carts for the whole family. No wonder the category has become a key battleground.There’s another reason why it’s worth supermarkets’ while to go vegan. Plant-based versions of festive favorites such as pigs in blankets tend to be more complex to make and require innovative ingredients. J Sainsbury Plc is this year offering party food made from the blossom of the banana tree, which can be used as a substitute for fish. This builds on the popularity of the jackfruit, a tropical fruit that is a good alternative to pulled pork. All of this added value means supermarkets can charge a premium.QuicktakeThe Vegan EconomyThat won’t last forever though. The U.K. arms of the German discounters Aldi and Lidl are piling into this market too. Lidl has two Christmas-specific vegan lines, while Aldi has nine, including pastry crowns and vegan cocktail sausage rolls. Neither had a plant-based offering last year. Wm Morrison Supermarkets Plc recently cut the price of its foods that are free from certain ingredients, such as gluten, while Tesco Plc has launched an affordable plant-based range.In another sign of the times, supermarkets this Christmas season are bulking up on party drinks that are low in alcohol, or contain none at all. Not only do they tend to be premium products, particularly non-alcoholic spirits, but retailers don’t pay duty. So, while they can charge the same or more for a fancy but sober drink, they get to keep a bigger slice of the selling price.It helps that the market is growing rapidly, as many consumers, particularly younger people captivated more by their social media feeds than their real social life, reduce their alcohol intake. Beer led the way, spawning Budweiser’s Prohibition Brew and Brewdog’s Nanny State, with wines and particularly spirits exploding this year. Demand from supermarket shoppers follows the trend in clubs and pubs where “mocktails” are now a staple of the cocktail menu. Going on the wagon is usually associated with January, but the run-up to Christmas can also be a time for restraint as people become more conscious of pacing themselves through rounds of festive events, not to mention all of those designated drivers. Asda, the U.K. arm of Walmart Inc., estimated that December sales of low- and no-alcohol drinks are double those of the average month. It’s all part of the new mood around Christmas, characterized by rising environmental awareness and a focus on health and wellness. Throw in the ongoing uncertainty around Brexit and the general election, and there are fewer celebrity blockbuster Christmas advertisements this year, with most retailers returning to traditional themes such as family and nostalgia for the past.Even tree trimmings are falling in with the trend. The Sanctuary range from John Lewis features pastel hued baubles including Buddha heads and an ornament depicting a woman reclining in a luxurious bubble bath. Its focus is on serenity — something that’s often in short supply over the busy festive season.After the decorations come down, consumers may continue to embrace plant-based diets with Veganuary, which has rocketed in popularity over the past five years. Dry January will bolster sales of no- and low-alcohol ranges. But beyond that, it could well be retailers themselves that are in need of some self-care. The months following the holidays are often lean ones, as consumers rein in spending after the excess of Christmas. It can also be tricky for supermarkets to accurately gauge demand and control waste when consumers switch in and out of different food and drink trends so dramatically. This year could be particularly hard if the election is followed by the return of fretting over Brexit. So these swings will be an extra burden to manage.The New Year hangover may still be with us, even if it is an alcohol-free one.To contact the author of this story: Andrea Felsted at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
After failing to merge with Walmart-owned Asda earlier this year, J Sainsbury is dusting itself off with a plan to cut costs and woo customers with lower prices.
(Bloomberg Opinion) -- In the five years since Tesco Plc was plunged into the biggest crisis in its history, Dave Lewis, its chief executive officer, has executed an (almost) textbook turnaround of Britain’s biggest retailer.He’s now decided that his job is done and he will hand over the reins next year to Ken Murphy of Walgreens Boots Alliance Inc.“Drastic Dave” — a moniker Lewis picked up because of his cost-cutting zeal in a former job at Unilever Plc — took Tesco out of intensive care. He revived sales growth, restored profit, cut debt and reinstated the dividend. The shares are 18% higher than they were back in 2014, when Tesco announced a bombshell 250 million-pound ($307 million) profit black hole. That stock price increase is twice that of the FTSE 100 index.There’s still a vague sense of disappointment, though. One might have expected some Lewis initiatives, such as taking prices closer to those of the German-owned discount grocers Aldi and Lidl, to bear more fruit. While Tesco is managing to grind out incremental growth in an ever-more-competitive market, it’s hard to get too excited by that.Lewis did deliver on his key turnaround target: lifting the company’s operating margin to between 3.5% and 4% six months earlier than expected. So he’s making the wise move for a CEO of going out on a high note.But it’s curious that he didn’t appear to be in the running for two other high-profile CEO posts that have been filled recently, at the consumer goods giants Unilever Plc and Reckitt Benckiser Group Plc. Lewis doesn’t have another job to go to and plans to take some time off before thinking about his next move.The choice of replacement is certainly a surprise. Lewis’s natural successor was Charles Wilson, the popular ex-boss of Booker, which Tesco bought in 2018. However, he stepped back from running Tesco’s British arm last year due to illness. Murphy was joint chief operating officer at Walgreens’ British pharmacy chain Boots before being promoted at the American parent. So he does have experience in the fiercely competitive U.K. retail market.Still, he has no direct experience of the cutthroat grocery sector, which has been transformed by the price-slashing antics of Aldi and Lidl. This is Tesco’s greatest challenge. At least Murphy will benefit from the advice of Wilson, who still has a senior role at Tesco.While the supermarket giant has prospered from the weakness of its great rival J Sainsbury Plc, the latter appears to have gotten its act together lately. And while the British shopper has remained pretty immune to Brexit so far, a no-deal departure from the European Union might change that.It won’t be easy to balance these challenges against an investor base that’s expecting a special dividend or buybacks from next year. Already Tesco’s U.K. sales growth has slowed. That may reflect a broader deceleration across the grocery market, after a strong 2018, but a slowdown is a slowdown. Shareholders are naturally cautious about the management change, although the stock did rise 2% in a falling London market on Wednesday.At least Lewis didn’t hang around beyond his sell-by date, unlike so many other CEOs.To contact the author of this story: Andrea Felsted at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- In the glossary of business jargon there’s a term beloved by financial analysts but that journalists find especially grating: the “equity story.”It’s the sort of non-speak that can be explained far more simply: Why should you invest in a given company? That’s something that WPP Plc Chief Executive Officer Mark Read, an operations guy, has yet to answer adequately when it comes to the firm he took over a year ago from Martin Sorrell, something of a finance wonk.The task should sit at the top of priorities for John Rogers, the retail executive appointed as WPP’s new finance chief on Tuesday. That’s not to say that Read hasn’t been busy since taking the helm of the world’s largest advertising holding company. He’s clinched deals to sell assets worth 3.6 billion pounds ($4.4 billion), merged divisions to cut costs and improve efficiency, and stanched some of the revenue declines in North America. The share price has recovered to outperform archrival Publicis Groupe SA since Read announced 2021 growth targets in December.But the London-based company’s shares are still trailing its other major peers — Omnicom Group, Interpublic Group and Dentsu Inc. — when compared to expectations for earnings a year out. Investors are hungry to understand just how WPP’s new guard will translate all of that action into solid, durable growth.Read’s predecessor Sorrell had a seemingly straightforward formula to deliver just that. He promised investors annual earnings per share growth of between 5% and 10%, a pledge he tended to keep until recent years. He did so with a personal recipe of strict targets for organic revenue growth, profitability improvements, stock buybacks and acquisitions and a little sugar on top, a 50% dividend payout ratio. The approach kept shareholders happy and the stock steadily ticking upwards for years.Echoing that formula isn’t realistic in the current era. A shift toward digital marketing on platforms such as Google and Facebook and the incursion of consultancies into the advertising market means dependable revenue growth is far harder to realize. And knuckling down on costs can make it yet harder still. In an attempt to keep the focus clear, Read changed WPP’s bonus policy to place greater emphasis on sales growth than profitability improvements.Rogers, who will join from U.K. grocer J Sainsbury Plc where he had been CFO for 6 years, has a difficult act to follow at WPP. Paul Richardson had a lower public profile than Sorrell, but he led WPP’s finance operations for 23 years. The firm generated an average return of 10% a year in that period.Rogers’s more recent background running Sainsbury’s Argos general-merchandise retail division, which it acquired in 2016, should serve him well, according to media consultant Alex DeGroote. It’s given him valuable experience integrating businesses and managing a vast property portfolio. But a lack of experience in the advertising industry and in North America mean he’s unlikely to be tasked with fixing WPP’s operations in the U.S. and Canada, where revenue declines have dragged down the rest of WPP.His main role will therefore be to help Read crystallize a realistic vision for the company that can reinvigorate investors. Optimism is currently muted: analysts’ average 12-month target price is just 8% above the level at which WPP is currently trading. If Read is making the necessary operational improvements, Rogers needs to help turn that into a better story.To contact the author of this story: Alex Webb at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Advertising group WPP has poached John Rogers, the boss of Sainsbury's Argos business and previously seen as a frontrunner to be the British supermarket group's next CEO, as its new finance chief. Rogers had been seen by analysts as the favourite internal candidate to succeed Mike Coupe as chief executive of Sainsbury's in due course.
Stocks in Europe traded lower on Wednesday amid the political cloud surrounding President Trump ahead of key trade talks between the U.S. and China.
Asda, the British supermarket arm of U.S. retail giant Walmart that is considering a future UK stock market listing, saw its profit increase 9.2% in 2018 - a year when it was unsuccessfully targeted for takeover by rival Sainsbury's. Sainsbury's 7.3 billion agreed bid for Asda was blocked by Britain's competition regulator in April, a full year after it was launched. Walmart said in May it would instead look at an initial public offering for Asda.
German discount supermarket group Aldi plans to pump 1 billion pounds ($1.25 billion) into Britain, chasing market share at the expense of profit, which dropped by 26% last year as it pursued sales growth, store openings and new customers. Britain's fifth biggest supermarket, which is privately owned by Germany's Aldi Sud, signalled no let-up for its larger rivals as it reaffirmed a commitment to investing in the UK, despite a low price pledge denting its 2018 profit. Aldi UK, which trades from about 840 stores and has a grocery market share of 8.1%, said sales increased 11% in 2018 and it gained 800,000 new customers.
Britain's second-biggest supermarket, Sainsbury's , vowed on Friday to halve plastic packaging by 2025, promising to switch to alternative materials and refillable options to meet consumer demand for less waste. Having reduced plastic packaging by just 1% in 2018, Sainsbury's said a "transformational leap in thinking" was required to tackle the almost 120,000 tonnes of plastic packaging it uses a year. It said it used the most plastic in milk bottles, packaging for fruit and vegetables, and drinks.