A backcloth of intensifying competition — led by the German budget chains Aldi and Lidl — has smashed earnings at established chains like Tesco, Sainsbury’s and Morrisons as the importance of buying more for less has steadily grown.

But could latest data from Kantar Worldpanel suggest that a change is in the air?

Booze sales sprint

The retail expert advised on Tuesday that supermarket sales in Britain edged 0.3% higher during the 12 weeks to 11 September thanks to the ‘Olympic Effect.’

Alcohol sales rose by 8.5% in the past four weeks as Britons sat down to watch The Olympic and Paralympic Games. This phenomenon helped Tesco enjoy its best three-month performance since March 2014 — sales here dipped ‘just’ 0.2% during the latest period as the retailer’s promotion-led ‘Drinks Festival’ took off.

Shares still slipping

Still, these latest results couldn’t mask the huge structural changes damaging Tesco and its peers. A sales decline is never cause for celebration, after all, and Tesco’s latest drop pushed its market share to 28.1%, down 10 basis points from a year earlier.

Sales at Morrisons slipped 2.3%, meanwhile, with store closures adding to the pressures created by its eroding customer base. The grocer’s market share now stands at 10.4% versus 10.7% a year ago.

And till rolls at Sainsbury’s shrank 1.4% in the period to mid-September, also forcing its market share 30 basis points lower to 15.9%.

Discounters dance higher

Once again it was left to the cut-price operators to set the pace, with sales at Lidl leaping 9.5% and revenues at Aldi roaring 11.6% higher. Their respective shares of the market came in at 4.6% and 6.2% as a result, up from 4.2% and 5.6% in the same 2015 period.

Another stellar performance led Kantar’s head of retail and consumer insight Fraser McKevitt to comment that “not only are both continuing to expand their store estates but existing customers are visiting more frequently and upping their basket size.”

And the surging popularity of the Germans’ cheaper products continues to drive deflation across the industry, with Kantar noting that prices dropped 1.1% during the latest three-month period.

Triple trouble

Additionally, Kantar’s comment that “discounters are helping drive the industry-wide growth in premium own-label lines” will come as a further blow to Tesco et al.

Indeed, it’s the inability of the UK’s traditional outlets to adapt and innovate that has opened the door for Aldi and Lidl to run roughshod over their patches. Instead the country’s big players remain reliant on a course of earnings-shredding price reductions to stop their stores becoming halogen-lit ghost towns.

And US internet colossus Amazon’s move into the grocery sector has heaped on further pressure in the key online sub-segment. Just this month the company expanded the scope of its AmazonFresh delivery service to 190 London postcodes, up from 69 when launched three months ago.

Against this backcloth I believe investment in any of the Footsie’s embattled supermarkets remains risky business. Indeed, I believe things will become a lot tougher for Sainsbury’s, Tesco and Morrisons in the months and years ahead.

The post Is now the time to buy back into Britain’s supermarkets? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon.com. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Supermarket strides

Grocery giant Sainsbury’s (LSE: SBRY) continued its recent heady run last week, a 4% advance from Monday to Friday meaning the supermarket has risen by almost a quarter during the past eight weeks alone.

Investor appetite has been stoked by waves of positive data surrounding the firm, and latest Kantar Worldpanel research kept this trend running — the chain saw sales increase 1.2% in the 12 weeks to March 27.

Still, I believe the firm’s shares are in severe danger of toppling from current 18-month highs. True, its decision to ditch ‘multibuy’ deals and massage custom through improved brand investment is clearly paying off at present.

But the business remains at the mercy of Aldi and Lidl, operators whose store expansion schemes are driving sales growth through the roof — revenues at these budget outlets rose 14.4% and 17.7% respectively in Kantar’s latest reported period.

These pressures are expected to push earnings 6% lower in the year to March 2017, resulting in a P/E rating of 13.5 times. While this multiple is certainly very decent on paper, I believe Sainsbury’s has a hell of a fight in front of it to get the bottom line moving higher again as the competition in-store and online intensifies.

Positive update

Fellow retail giant Marks and Spencer (LSE: MKS) also leapt last week following better-than-expected trading numbers, the British shopping icon’s shares adding 9% between Monday and Friday.

M&S advised that like-for-like clothing and homeware sales slipped 2.7% in the 13 weeks to March 26, a vast improvement from the 5.7% decline punched in the prior three-month period.

Elsewhere, new store openings at its food division helped power sales here 4% higher in the quarter. And improvements to its M&S.com portal pushed online revenues 8.2% higher.

With its international operations also picking up momentum, I reckon there’s plenty for potential investors to get excited about, even if the firm’s fashion lines still require plenty of work.

The Square Mile expects M&S to enjoy a 5% earnings rise in the year to March 2017, creating a great P/E rating of 12.5 times. I reckon this represents brilliant value considering the retailer’s excellent long-term growth drivers.

Risky Randgold?

Precious metals play Randgold Resources (LSE: RRS) was also a standout performer between last Monday and Friday, the digger’s stock gaining in 6% value thanks to fresh erosion in the US dollar.

This factor propelled demand for greenback-denominated gold higher once again, the yellow metal shooting back above the $1,240 per ounce marker.

However, I believe the gold price recovery is built on shaky foundations. I expect the North American currency to appreciate in the months ahead as expectations of Federal Reserve rate hikes intensify. And still-soft physical gold demand raises further questions over the underlying strength of gold’s recent ascent.

The City expects Randgold Resources to enjoy a 24% earnings rise in 2016, resulting in a mega-high P/E multiple of 37.4 times. I believe such a reading is far too expensive given the murky outlook for precious metal values.

The post Should You Buy Last Week’s Chargers Randgold Resources Limited, J Sainsbury plc & Marks and Spencer Group Plc appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.