At 8am the car park at Lidl is already starting to fill up. It’s impossible to say whether all the shoppers have abandoned Asda to be there, but clearly a good many of them have. Its slice of the supermarket cake according to Kantar  is a distinctly thin 16.2 per cent, the lowest for nine years.

Aldi and Lidl have prospered since the recession destroyed Tesco’s strategy of buying up suitable sites to keep others out, but none has suffered quite like Asda, which now has a market share below Sainsburys and is easily the worst performing big grocer. This will not have escaped Asda’s owners, Walmart. It’s surely only a question of time before the empire strikes back, and it has enough financial firepower to absorb the pain.

Morgan Stanley’s analysts are expecting a response from Bentonville any month now. As they say: “Should Asda decide to sacrifice 200 bps of operating margin (which stood at 5.3% in calendar 2014) to drive market share gains, that could potentially wipe out half of the industry’s profit pool.”

That pool is not exactly brimming today, and the concern that it might have the plug pulled on it again should Asda “invest” in lower margins has spooked investors who were already nervous at the pace of deflation in food prices. Tesco shares, after a brief rally this week, have slumped again, and at 145p they are cheaper than at any time this century. Unless and until Dave Lewis can find a way to stop the rot, they are not obviously a Christmas bargain.

However, Tesco still has 28 per cent of the UK grocery market, with the economies of scale that brings. It faces more misery before things can get better, but the same may not be true of the weakest of the big four, Wm Morrison. It looks woefully exposed.

 

An Alliance of interests, we hope

A Christmas update arrives from Alliance Trust, following Katherine Garrett-Cox’s cheery message last week. There’s still no date for her to step down from the board, while her husband has raised £1.5m from selling trust shares. This is despite her determination to see “moments of genuine positivity” in Alliance’s unhappy year, so an unkind soul might consider the sale as running away money, or ask whether a man who is tired of Dundee is tired of life.

His wife is in a sort of limbo. After the board was forced to accept Rory Macnamara and Anthony Brooke (not Chris Samuel and Karl Steinberg, also new appointments, as stated here last week) as directors, she promised to stand down, while carrying on as chief executive. Her package of handsome salary and two types of incentive awards, as transparent as a mobile phone tariff, is apparently under review, although the new structure means the trust has no obligation to reveal the result.

But put it this way: were an executive to be promoted to a main board as CEO, would she not expect a pay rise? The last accounts have pretty little charts signalling that many of the criteria for future payment of awards are being met, despite Alliance’s mediocre investment performance. This just goes to show how important it is to pick the right criteria in the first place.

If you have tears to shed…

Much (synthetic) wailing and gnashing of teeth at the halving of the interest rate on pensioner bonds. These were a bare-faced pre-election bribe for the oldies, and now there’s no longer an election to win, there’s no need to go on paying the bribe. The 2.8 per cent interest on one-year money was way out of line with market rates, which is why buyers had to be restricted to £10,000 each.

So when the year is up, the lucky pensioners will have earned a maximum of £280, or £224 after basic rate tax. Many with a spare ten grand will be higher rate taxpayers, which means £168 after tax. Holders who do nothing when the bond matures will be paid 1.45 per cent – slightly below the best rates elsewhere – and so will see the income on their £10,000 fall by about half that ridiculous winter fuel bung. Goodness, no wonder Age UK is complaining.

This is my FT column from Saturday

 

 

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