Ian Enslin, Charity Director at Waverton Investment Management, comments on Sainsbury's and the 'Big Four' retailers…
There is significant value in the big four food retailers, but they are lumbered by a cost base which can no longer be justified by the lack of growth and an imminent and inevitable price war under which they will suffer.
Sainsbury's has to make a choice now as to whether it is going to attempt to compete in the bargain basement on price or re-shape it's business from the ground floor upwards to create a sustainable retailer shoppers want to visit over the long-term.
Cost cutting will follow, as will greater discipline in its investment decisions, but more radical management is needed before Sainsbury's has any opportunity of regaining market leadership. For this, shareholders will have to accept a long period of low returns and high investment.
