Hostilities may have ceased over the festive season in 1914, as the Sainsburys commercial reminds us, but in the supermarket sector, theyre rolling out the big guns.
Life And Debt
They have a massive target to aim at, with the average UK adult gearing up to spend 530 this Christmas, or 26bn in total, according to the Money Advice Service. Thats a rise of nearly 9% on last years 487 personal spend.
To hell with stagnant wages, almost half of consumers will be putting their Christmas on credit. But the supermarkets wont mind, provided a healthy chunk of this debt-fuelled spending goes to them.
Stuck In The Mud
The big Christmas push comes just as supermarkets have been warned that, like ageing generals, they are fighting the last war rather than the current one.
Goldman Sachs has just warned that supermarkets need to close one in five stores, and puts their problems down to the pursuit of short-term profit growth in the face of deep structural shifts.
Short-term profit-seeking will be the order of the day over the next five weeks, but all will need a major structural rethink in the New Year. Christmas wont change that, no matter how well they do, relative to each other.
Lions Or Donkeys?
Retrenchment has already started, with Tesco recently canning two supermarket openings despite actually building the stores, the donkeys. Closing existing stores will hit supermarket valuations, as they will have to write down the value of those sites, so investors beware.
German discounters Aldi and Lidl arent the only threat facing Tesco, Sainsburys and Morrisons. This Christmas will doubtless set new records for online shopping, while last-minute convenience store sales will continue to cannibalise their superstores.
This Means Price War
The big supermarkets also have to contend with low morale, as new figures showing that food sales have fallen by value for the first time in 20 years due to the price war and deflating prices, according to analysts Kantar WorldPanel.
The sector really is facing war on all fronts. The supermarkets are boldly mobilising to do battle over Christmas, but I fear the war may already be lost.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of Tesco. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.