One in five supermarkets must close if the sector is to remain profitable. In a controversial report from Goldman Sachs which has divided opinion, analysts have said that changing shopping habits and the continuing rise of the discounters, has loosen the grip of the supermarkets.
A programme of closures is the only way to return to profitable growth, said the report. Tesco, the much maligned number one grocery retailer, is in the gravest danger, with 56% of its estate over 40,000 sq ft.
With convenience shopping in steady growth, Goldman Sachs analyst Rob Joyce said the industry could not survive by battling each other for market share through increasingly aggressive price cuts. “We believe that any major price investments by Morrisons, Sainsbury’s or Tesco can be exceeded by the discounters,” he said in the report.
It was predicted that large stores were likely to see sales decrease by 3% per year until 2020.
Speaking on BBC’s Newsnight, ACS Chief Executive James Lowman said the growth of convenience was welcome, but planning issues remained: “There are some worrying ways that the regulators are behind the market. Despite consumers moving back into town, the regulators and local authorities are behind the curve in allowing large numbers of supermarkets to be built out of town. The negative outcome of this is that we end up with lots of out of town supermarkets that end up just being derelict, putting off investment everywhere.”