Investors who still want to believe in the big supermarkets have to cling onto anypiece of positive news these days.
A few early cost-cutting decisions by new boss Dave Lewis was all it took to convince themto pile back into Tesco (LSE: TSCO).
Yet this weeks news that UK wages, including bonuses, has risen 2.7% in the last year brought only brief respite to the embattled sector.
I would have thought that was arealplus, putting real money in peoples pockets, given that inflation is just 0.1%.
Werent the big supermarkets supposed to be losing ground to Aldi and Lidl because cash-strapped customers were desperatefor discounts?
The newswas followed by new official figures on Thursday showing retail sales upa better-than-expected 4.6% in May, suggesting consumers really are feeling more buoyant.
Food sales rose at a slower pace, 2.7%, but that was still far better than Aprils figure, a 0.1% drop.
Sales grew by both value and volume, even if this was partly driven by alcohol promotions.
The underlying problem is that even if sales do rise, margins are still being squeezed by the ongoing price war.
People are still watching the pound in their pockets, even if they have more of them, in real terms.
Plus rivals Aldi and Lidl are still walking on cheap bottled water, with Which? naming Aldi named supermarket of the year on Wednesday.
Investors in the big supermarkets are constantly braced forbad news and duly received it on Wednesday when Credit Suisse posted a negative note on Tesco and Sainsburys, relegating them to underperform
It lowered Tescos price target to 169p (against todays 209p) and was similarly miserly towards Sainsburys (219p against todays 261p). Morrisons was deemed neutral with the target equal to todays 176p share price.
The broker said it saw few opportunities within a sector that has historically misallocated capital, faces extreme competitive pressures and operates in a low growth environment.
The numbers wont necessarily improve even if wages and sales continue on their upward path, because the sharp fall in margins will prove difficult to unwind.
I wouldnt have guessed that Morrisons would look like the best prospect of the three FTSE 100-listed supermarkets right now. The rest, however, is sadly predictable.
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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.