Asda misses quarterly target
Published:  05 September, 2006

Asda, in the face of tough competition from Tesco and other major supermarket groups, has failed to hit its quarterly profit target.

This contributed to Wal-Mart, Asda's US owner, announcing its first fall in profits for ten years. The main cause for the drop in profits lay in the £457m hit Wal-Mart had to take as it retreated from its ill-planned invasion of the German grocery market.

The competition in the UK market ground profit margins down to the bone at Asda, with earnings 'moderately below plan'. However, Asda's sales were better than expected. It seems the retailer is recovering some market share as a result of dropping its prices still further to produce sales growth 'in low single digits'.

Birds Eye auction

The auction for Birds Eye, being sold by Unilever for an expected £1.2bn, has been disrupted by the market's favourite bidder, CapVest, pulling out. CapVest lost its backers and chosen chief executive and withdrew from the auction. There is speculation that the withdrawal is because the purchase may be referred to the European competition authorities. CapVest already owns some of the best-known names in the frozen food industry.

The market wisdom is that Kerry, the Irish food company, backed by Blackstone and JP Morgan's private equity arm, is now the favourite to buy Birds Eye. Unilever is selling the company against the background of a fall in frozen food sales generally of 4.5% in 2005, which caused Birds Eye to deliver a disappointing performance. Frozen foods have been hit by the trend towards healthier eating with buyers seeking chilled or fresh foods in preference to frozen.

MERGER OPPOSITION

The Costcutter merger with NISA-Today rumbles along with occasional conflagrations between Costcutter boss Colin Graves and Nisa-Today's shareholders, led by Mark Proudfoot. The latter will not vote for the deal to go through and claimed support from 25% of Nisa shareholders, which could be enough to stop the deal.




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