Somerfield chief pays the price for profits warning

Somerfield, the struggling supermarket group, axed its chief executive yesterday as the company issued a grim profits warning which pushed the shares close to their all time low.

Alan Smith will leave the company with a pay-off of about £400,000 as John von Spreckelsen, Somerfield's executive chairman, assumes full executive responsibility for the group. Mr Smith, who joined from Punch Taverns two years ago, becomes the second executive to leave the company in a matter of days. Martin Gatto was replaced as finance director last week with Steven Back joining from the rival chain Budgens. Mr Gatto is in line for compensation of almost £300,000.

Somerfield shares sank almost 50 per cent in early trading as the company warned that operating profits for the year to date were the same as last year's level. It said operating profits for the full year to April would be similar to last year's £28m. City analysts had been forecasting pre-tax profits of £30m to £40m for the year but have now cut them to £16m. The shares closed down 45p at 50p.

The company, which also owns the Kwik Save stores, blamed the shortfall on deteriorating market conditions and "material deflationary pressure". However, it said like-for-like sales in the first seven weeks of the second quarter were 1.7 per cent ahead of the same period last year.

Philip Dorgan, an analyst at WestLB Panmure, said: "This is a business which has found it difficult to grow the top and bottom line at the same time. The business isn't going bust but if you haven't got the assets or the brands it is a struggle."

Somerfield has been hit hard by increasing competition as the major supermarkets such as Tesco, J Sainsbury and Asda battle it out for dominance in the UK. Sainsbury's last week reported underlying sales growth of 2.4 per cent while Tesco last month reported like-for-like growth of 3.9 per cent.

Ian McDonald at Numis Securities commented: "A few years ago you went to Kwik Save to buy branded products at low prices. But with Tesco and Asda turning the price screw, the reason to go is gone. The shops are poorly located and under-invested."

Somerfield has been a long-term struggler, suffering from a weak brand name and a poor portfolio of stores. After its merger with Kwik Save the previous management converted many of the Kwik Save stores to the Somerfield brand but found many customers preferred the discount format. It is testing new designs for Kwik Save.

Somerfield said Mr von Spreckelsen would retain his title of executive chairman rather than move to the chief executive position. With no plans to recruit any more executive directors there may be questions about the corporate governance at the company.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Financial Director / FD / Senior Finance Manager

Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...

Recruitment Genius: Junior / Apprentice Sales Executives - OTE £50,000

£11000 - £50000 per annum: Recruitment Genius: This financial company offer ma...

SThree: Recruitment Consultant

competitive + incentives + uncapped comms: SThree: Did you know? 98% of our di...

SThree: Trainee Recruitment Consultant

competitive: SThree: Did you know? 98% of our directors started with SThree as...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen