It seems a very fortunate decision that I sold out of Tesco (TSCO:LN) while still in profit (albeit for personal reasons other than investment prospects). Admittedly things were choppy even back then, but I’m sure nobody apart from those involved could have second guessed the sheer scale of events and pace of decline in recent months. I was prior to these recent revelations, even optimistic over longer term prospects.
That for me however has all changed anyway. Partly due to a few years of UK economic tightening, and partly due to the efforts by the budget chains to lure a broader spectrum of customers in, with keen pricing, and premium budget offerings.
While Tesco remain an economic gargantuan, I think we may be in for a long period of decline in market share for all the big three. Why? Well in my opinion it is now clear that the UK supermarket sector has evolved fundamentally. The previous habitual shoppers, faithful to a single store and doing a weekly shop are all but gone, and replaced with nomadic grazers, favouring to spend at the budget chains for the majority everyday items, and visiting premium supermarkets for what remains. In my opinion this trend is noticeable in the re-balancing seemingly taking place in market share, between the big three and the rapid rise of the budgeteers like Aldi and Lidl. This trend I think will remain set for years to come I believe.
How this will translate in future sales and the bottom-line for the likes of Tesco in the next few years will be critical. Certainly I’m going to watch with interest, a turnaround I think is an incorrect terminology, we are surely talking in terms of halting a decline.
From an investors perspective, opportunities will surely present themselves during this transition. I’m just not sure I’m going to be rushing back anytime soon.
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