Sir Ken Morrison has also given his backing toMike Coupe, the chief executive of Sainsburys. According to a report in The Times, Sir Ken and his son, William started acquiring shares in Sainsburys lastyear and now own a combined stake of 11.9m.
The revelation that Sir Ken is betting on the success of Sainsburys overMorrisonsshould come as no surprise to investors. Indeed, back in June last year, he spoke out against Morrisons strategy at the companys AGM.
SirKen Morrison former chairman and now Life President ofMorrisonstransformed his fathers small business into the UKs fourth largest supermarket and guided the company for more than 50 years.
Sir Ken retired as chairman in 2008, but returned to the media spotlight last year, when he blasted Morrisons management at the companys AGM.The former chairman told the current board that the groups losses were disastrous and the company had failed to run its core supermarkets correctly:
I personally thought they[the results]were disastrous. I warned in 2009 and 2012 that changes being implemented by directors would seriously damage the business [my comments] were absolutely right and today we have seen the consequences.
Its now emerged that a few months before Sir Ken made these comments he was buying shares in Sainsburys. So its clear which company the retail veteranbelievesis best positioned to navigate the UKs turbulentretail market.
The right choice
Sir Ken seems to have made the right choice betting on Sainsburys. In the year to date the companys shares are up 6.3%, outperforming Morrisons shares by 24% excluding dividends.
Morrisons troubles have been well publicised. The retailer hasstruggled to fend off competition from discounters Aldi and Lidl, as well as price-cutting by larger rivals. Profits have collapsed, the group has been forced to sell its loss-making conveniencestore portfolio, and the dividend has been cut.
Unfortunately, it doesnt look as if things are going to get any better for Morrisons any time soon. The company is facing multiple pressures in the form of food deflation, which is currently running at a rate of -2.5% per annum, increasing competition from the likes of Aldi and Lidl, and higher costs due tothe introduction of the governments national living wage next year. City analysts expect Morrisons earnings per share to contract 16% for the year to 31 January 2016, and the company is trading at a forward P/E of 16. As a result, the companys shares could have further to fall.
Sainsburys is facing the same pressures as Morrisons, and analysts expect the companys earnings per share to also fall 16% next year. However, unlike Morrisons, Sainsburys shares are trading at a relatively undemanding forward P/E of 11.3, implying that theres less room for them to fall if things dont go to plan.
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