The Christmas trading statements from Tesco (LSE: TSCO), J Sainsbury (LSE: SBRY) and Wm Morrison Supermarkets (LSE: MRW) all triggered big market moves when they hit the newswires with Tesco shares closing nearly 15% higher on the day of its statement.
However, while Tesco has delivered the biggest gain so far, were only two weeks into 2015.
Ive been taking a closer look at all three supermarkets to choose my pick for the year ahead.
Tescos decision to close loss-making stores, scrap plans for 49 new stores, cut capex by 1bn and cancel the final dividend all make good sense. The decision to hire Matt Davies the highly regarded chief executive of Halfords Group to run the firms UK business also looks smart.
In my view, Drastic Dave Lewis, Tescos new chief executive, is moving in the right direction, but weve yet to see how he will deal with stabilising Tescos debt-laden balance sheet and revaluing the firms property portfolio.
Sainsburys decision to peg the falling dividend to earnings per share is sensible, but I am concerned by the firms recent admission that 25% of its stores are now too large.
Im also worried that Sainsbury appears to be reacting to changes made by the other two firms, rather than acting out a clear recovery strategy of its own.
This week, for example, Sainsbury announced head office staff cuts and store closures, echoing Tescos recent announcement. Why wasnt this information presented with Sainsburys Christmas trading statement, last week?
Morrisons chief executive Dalton Philips will depart after the firm publishes its full-year results in March. The firms Christmas trading update suggests that trading is stabilising, but Morrisons 3.1% drop in like-for-like sales was larger than those seen at Tesco and Sainsbury.
I believe Mr Philips turnaround plan should bear fruit, but in my view, many of the changes hes making should have been started earlier than they were. This may be one reason why incoming chairman Andrew Higginson was determined to get rid of Mr Philips.
Which should you buy?
Im cautious about Sainsbury: Im concerned that it is too reliant on its more upmarket brand and may prove weaker than it appears.
In my view Tesco and Morrison are more appealing long-term recovery buys. Of the two, Morrisons edges ahead for me, as it looks cheaper, and has more straightforward finances.
Of course, I may be completely wrong: I can reveal that none of these firms were chosen by the Motley Fool’s market-beating analysts when they selected their “Top 5 Shares To Retire On“.
I can’t reveal the names of these companies here, but I can tell you that each is a FTSE 100 firm with a strong brand and a long history of reliable dividend growth.
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