Budgens hit by price war

CUTS in food prices to counter fierce competition mean that trading profits at Budgens are likely to fall by 15 per cent in the year to 30 April, writes Heather Connon. The group also warned that converting some of its stores to discount outlets has cost pounds 1m more than expected.

Budgens said yesterday that, although it had 'traded resiliently' in the face of aggressive competition, its sales were down 3 per cent on last year. A spokesman admitted that some of its stores had been more expensive than rivals, adding that the the price reductions also reflected the conversion of nine shops to Penny Market discount outlets.

The conversions, including loss of sales as the new stores become established, is expected to cost pounds 1.6m, compared with an earlier estimate of pounds 600,000. The cost will be offset by a gain on the sale and leaseback of one of the company's warehouses.

Budgens' profit before tax last year was pounds 6.2m and the group had been expected to make slightly more this year. Analysts yesterday downgraded their forecasts to about pounds 5m. The shares closed down 5p at 29p.