Retailers must close one in five of their stores in order to turn around flagging sales figures and reboot the grocery market, a report has said.
A large-scale closure programme is the “only viable solution” to return to profitable growth for the major supermarkets, the study found, and said price cuts alone will not win the battle against hard discounters Aldi andLidl.
“We believe that any major price investments by Morrisons, Sainsbury’s or Tesco can be exceeded by the discounters,” said analyst Rob Joyce of report authors Goldman Sachs.
The report found that as over half of Tesco’s stores are bigger than 40,000 sq ft, the UK’s largest retailer will have the biggest problem.
And it said that multiple supermarkets would suffer like-for-like sales declines of three per cent a year until 2020, unless they begin to close stores.
“Our analysis of the UK grocery industry suggests capacity exit is the only viable solution for a return to profitable growth,” the report said.
The latest grocery share figures from Kantar Worldpanel, published today for the 12 weeks ending 9 November 2014, show that all the top four retailers have lost market share, while Aldi and Lidl have grown (up 25.5 per cent and 16.8 per cent respectively).
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “The declining grocery market will be of concern to retailers as they gear up for the key Christmas trading season. The fight for a bigger share of sales has ignited a price war which means an average basket of everyday goods such as milk, bread and vegetables now costs 0.4 per cent less than it did this time last year. This is bad news for retailers, but good news for shoppers with price deflation forecast to continue well into 2015.”
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