CLOSING TESCO & RUNNING MRW
Personally I don’t think tomorrows numbers from Tesco will really change the debate.
Both were pricing in margins that were too low. This quarter will provide evidence that they were too low.
But upside from here requires you being comfortable modelling margins through 3% and given Aldi’s comments recently and Amazon coming into the market this is unlikely given they need price rationality to continue and none have shown this for any consistent period of time.
The major concern has to be the short base. And that is the risk for me into numbers.
We’ve had the move up for the numbers we’re about to get. So a lot is in the price and expectations are high form the analyst community.
Having said that we are going to close our short in Tesco pre tomorrow’s earnings release. We feel Morrison is a better short as there isn’t a self help story and recent Kantor data continues to be poor, unlike Tesco’s. We step aside in Tesco for a -2.04% lose.
UPDATE MRW
RE ITERATE SHORT ON POOR KANTAR PRINT
Tuesday • 08 March 2016 • 11:07
On an easy comp the Kantar print for MRW comes in at -4.4% which should take some of the wind out of its sales post the Amazon deal and the FTSE inclusion. We continue to think the Amazon deal is an overall negative for the industry and does not preclude the other food retail names from getting involved thus limiting pricing power.
The 50% rally more than prices in the margin stabilization we are likely to see at results on Thursday which is likely to trigger some profit taking.
Happy to sell more here.
MRW and TESCO: SELL
FRESH WAVE OF PRICE CUTS
Friday • 12 February 2016 • 11:43
UK retailers: Retail Week saying Aldi launching fresh wave of price cuts…
UK supermarkets have been very good recently on an unwind predicated on margin improvement. A fresh wave of price cuts would blow this out of the water. Would be selling MRW and TSCO first.