nickshanagher

City analysts are in the business of talking shares up and talking them back down again. So you have to treat what they say with caution. Even so, their feedback about Tesco, offers some pointers about where the convenience market may be headed. At Citigroup they talked about a future Tesco that within a few years would be an "entity without growth or cash flow generation." That is, it would not longer be opening new space and it would be forced into cutting prices. The issues are: concerns that new space opened will reduce profit margins (which may include on line sales as delivery costs are subsidised by bricks and mortar shoppers) competition from Aldi, which is about 25 per cent cheaper and growing strongly. In the UK, Tesco has 39.1 million square feet of selling space. In the last half year it achieved sales of £23.9bn in the UK. That is just over £23 of sales a week per square foot. This compares with estimates for Spar of £13, Premier of £12 and Londis of £11...

While the Grocer indulged in its usual agenda of knocking CTNs through the medium of Jerry Marwood, boss of Spar, two week's ago, his rather more insightful interview in the same issue provides two thoughts for local retailers. The first is that the "one-trick pony" is dead in the retail water, by which Mr Marwood means that retailers who buy an off-licence or a newsagent cannot expect to make a living on its core product range. This is not news. It was true that until the mid 1990s you could make a very good living on just selling confectionery news tobacco (CTN) or beers wines and spirits (BWS). It is also not news because both shop formats are in decline. Combined they account for fewer than 7.8 per cent of outlets. C-stores account for 44 per cent. It is also not news because the stores that remain are increasingly in locations where the business model makes sense - by travel points for example. However, the CTN owners and off-licence operators of the 1990s...