Bottom Line: Nurdin threatens a giant-killing

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THE FOOD retailing giants have to watch their backs all the time nowadays. Nurdin & Peacock, one of Britain's most successful cash-and-carry chains, is the latest company to emerge as a potential threat to their business with plans to import the club warehouse concept into the UK.

It will offer members a range of goods at considerable discounts for a small annual fee. The idea has been very successful in the US and one American company, Costco, already plans to open in Britain.

Much lower levels of service and capital costs - the warehouses will be giant sheds piled high with goods on pallets - mean lower prices that even Tesco, Sainsbury and Safeway may find hard to beat.

Nurdin reckons it can build a 100,000 sq ft outlet for pounds 10m to pounds 15m, whereas it costs Tesco pounds 23m to build a 40,000 sq ft superstore.

The three giants are already suffering from the penetration of other low-cost, no- frills retailers such as Aldi and Netto as well as the continued success of Kwik Save. Nurdin, the first British company into the club warehouse concept, should benefit from its early start.

Despite the fact that Nurdin's shares have risen from 145p to 218p over the past 12 months, they still look cheap at 11.1 times prospective earnings.

Its 1992 results, released yesterday, showed a 9.3 per cent rise in pre-tax profits to pounds 30.2m despite difficult economic conditions and the maturity of its traditional cash-and-carry business. The dividend yield is 4 per cent.

There are negatives, such as worries about planning permission for the warehouses and their effect on the company's independent retail customer base. But these are worth taking, given the discount rating.

Nurdin is a very tightly run company, with stringent cost controls. Buy the shares.