U.K. Grocers Push Europe Index to Best Week in YearTom Beardsworth
The Bloomberg Europe Food Retailers Index had its biggest weekly gain in a year after an upbeat forecast from Wm Morrison Supermarkets Plc drove up shares of the U.K.’s biggest grocers.
The index of 15 European companies including Tesco Plc and J Sainsbury Plc, the two biggest U.K. food retailers, as well as fourth-placed Morrison, climbed 3.6 percent to 95.77, the biggest weekly jump since October 2013.
Morrison said yesterday that it expects to beat a debt target and predicted revenues will rebound, bringing some rare good news to an industry where profit and sales have been battered by competition from discounters Aldi and Lidl. The share-price gains caused losses for short sellers who have been divesting stock they don’t own in anticipation of buying it back cheaper.
Investors are realizing “there is a pathway to higher profits,” Richard Clarke, an analyst at Sanford C. Bernstein, said by phone. “People hadn’t appreciated that there are costs to cut out of these businesses.”
Clarke said many short-sellers “got stung” by yesterday’s news from Morrison, which came after Marks & Spencer Group Plc, the owner of the Simply Food chain, increased its forecast for full-year profitability.
“There are a lot of people who trade the whole sector together and there is a read-across from Morrisons and M&S” to the other major retailers, Clarke said.
Even after falling 2.4 percent in London today, Morrison rose 8.8 percent this week, the biggest such advance since December 2008. Marks & Spencer was up 15 percent for the week, the most since April 2009.