City Talk

A roundup of financial news from industry players

Morrisons' challenge

Wm Morrison is outpacing its bigger rival supermarket groups on the sales growth front. Underlying sales at the supermarket group were up by 7.5% for the last trading quarter, boosted by management concentrating on fresh food sales. Dealers are looking forward to an extra 71m in profits from fresh food sales for the full year.

City analysts had anticipated that Morrisons should make profits of 664m this year, but have lifted their forecast to 735m. This would be a whopping rise of 14% on 2008. The difficult takeover of Safeway back in March 2004 is now a distant memory. Profits are well above the 600m made by both Morrisons and Safeway combined before they merged.

While Morrisons is still the smallest of the Big Four supermarket groups, it is catching up fast. Latest quarterly data, showing the percentage of grocery spend from TNS Worldpanel, shows Tesco is still top of the league at 30.8%, Asda second at 17%, Sainsbury's third at 16% and Morrisons fourth at 11.6%. The inky-fingered City scribblers reckon Morrisons is catching up on its rivals fast, with its profit upcurve "in a class of its own".

Uniq refocuses

Uniq, the chilled food group, racked up a 12.5m loss in the first half of its current trading year. The company is in the middle of a root-and-branch reform of its business, to transform itself into a truly British-based organisation and has sold off a French operation with this goal in mind.

Sales in the UK in the first half of the current year dropped by 1.6% and the shares fell 5p on the news. Uniq's biggest customer is Marks & Spencer and, in a statement to the market, pointed out: "The economic environment in which we are working was extremely difficult in 2008, with pressure coming down on all sides and consumers trading down across the board." In 2009, this pressure has not abated.

Ocado prepares for possible flotation

Ocado, the online grocer that delivers groceries for Waitrose, is completing a 40m fund-raising operation, backed by Jorn Rausing, the Tetra Pak billionaire.

The website plans to use the cash to slim down its debt prior to a possible listing on the stockmarket next year. A total of 20m is being raised from existing investors and 20m from various banks.

Good Life tesco

Tesco, the UK's biggest retailer, has asked for planning permission to create allotments at its Dobbies Garden Centres. This is in response to the new-found enthusiasm of recession-hit British gardeners to grow their own vegetables.

Tesco has also started selling live chickens, as well as hens and chicken coops to customers. The retailer is setting up 30 allotments adjacent to its Southport store in Lancashire and, if it gets the green light, the allotments will be rented out to customers next March/April. Tesco will also sell starter kits along with the rented-out allotments to give buyers everything they need to create viable allotments.It is all reminiscent of the TV programme, The Good Life, back in the 1970s, when self-sufficiency in food looked appealing in a similar recessionary climate.

'Fresh and Sleazy' attack on Tesco US

Across the Atlantic, Tesco's Fresh & Easy US retailing trial on the West Coast has been renamed Fresh and Sleazy by a US politician, over its alleged indifferent handling of workers' rights and attempts to block union recognition. A Fresh & Easy spokesman commented that if the majority of store employees asked to join a union through the democratic process that is fairly laid out by the National Labor Relations Board, Fresh & Easy will respect this decision. So far this has not happened.

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