2015 will see another battle for survival. So will they emerge stronger, or remain on the sick list?
When things are this desperate, investors will cling to any good news at all. News that Tescos like-for-like sales fell 0.3% over Christmas would once have been seen as a disaster, but is cause for celebration today.
Especially since it posted its first growth in fresh food volumes for five years.
New boss Dave Lewis continues to impress with his plans for radical surgery, and is happily untainted by any connection with the previous festering regime.
Drastic Dave is living up to his nickname by closing Tesco headquarters and 43 unprofitable stores, shutting the companys generous final salary pension scheme, and selling Blinkbox, Tesco broadband and the analytics business behind Clubcard.
He needs to be ruthless, with Tesco debt facing the prospect of being downgraded to junk status by credit rating agencies.
At 192p, Tescos share price has recovered from its 52-week low of 155p (that may one day look like a great entry point). The stock was up 6% on Thursday morning following its trading update, as brave investors bet onTesco climbingoff the critical list.
Sainsburys has also benefited from low investor expectations. A 1.7% drop in like-for-like festive sales looks good against pessimistic City forecasts of 3.2%. Incredibly, itsworst Christmas for more than a decade was heralded as a pleasant surprise.
Chief executive Mike Coupe is taking the price war to Tesco, spending 150m cutting the price of more than 1,000 goods. Yet Sainsburys actually benefited from customers trading up to its Taste the Difference range, where sales rose 5%, suggesting to me that it shouldnt stray too far downmarket.
My concern is that Tesco has the deeper pockets, and Lewis is building momentum.
One Reason To Shop at Morrisons
Better than expected results at Tesco and Sainsburys have bolstered Morrisons, although it is also thoughtto have endured a tough Christmas.
It is still playing catch-up, but at least its online channel is out there, and it is belatedly ploughing into the convenience store battlefield. But that is no guarantee of growth, with Tesco focusing its closures on underperforming convenience stores.
Morrisons crazy7.4% yield, which management has pledged to preserve, is still the juiciest reason to buy this stock.
Have supermarket stocks flatlined, or are their hearts beating again? That’s one for you to decide.
I reckonthere are more solid growth prospects out there on the FTSE 100 today.
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