Why 'one in five supermarkets must close'

Analysts at Goldman Sachs say that supermarket chiefs need to take drastic action by closing one in five of their stores to restore profit growth.

16:35 18 November 2014

Analysts at Goldman Sachs said that supermarket chiefs need to take drastic action and close one in five of their stores if they want to restore profit growth.

 

In a report, the analysts said that the move is the only viable solution to ensure continuous growth of the UK supermarket industry. 

 

The report claims that Tesco has been hardest hit by the effect of altered shopping habits and discount stores and thus has the biggest problem on its hands. 

 

Supermarket chains Tesco, Sainsbury’s and Morrisons have been experiencing weak food sales. Last week, Sainsbury's reported a first half loss of £290m as it counted the cost of pulling the plug on 40 new supermarket projects and wrote down the value of its underperforming stores. 

 

Goldman Sachs analyst Rob Joyce said: “We believe that any major price investments by Morrisons, Sainsbury’s or Tesco can be exceeded by the discounters." 

 

The unhealthy industry dynamic prompted him to predict large stores would suffer like-for-like sales declines of 3% a year until 2020, unless the big chains embrace the need for major reform.