Outlook: Safeway cut

BRITISH SUPERMARKET groups are not as good as they think they are, product displays are unimaginative and the UK market is not even that competitive. These were just some of the tub-thumping pieces comments to emerge yesterday from Carlos Criado-Perez, the flamboyantly named Argentinian parachuted in to turn round the struggling Safeway.

A former Wal-Mart man, Mr Criado-Perez knows all about price competition, but he also plans to change a few things on the shop floor. Take lettuces. Why, he wants to know, are they stacked in unattractive green trays, face down in sweating plastic wrapping? Free the lettuces, he says, and make the products look like you want to eat them. Ooh-er, it was never like this when stodgy old accountant Colin Smith was at the helm. But then the shares never did anything back then and neither did the profits.

So it was that Carlos the Lettuce Liberator talked a good game yesterday as new brooms usually do. Unfortunately, the first thing he chose to sweep out the door was the dividend, which has been slashed to make room for further investment in lower prices. The plan is to increase sales and profits by next summer with a concoction of better value, better service and improved range and availability.

It all makes sense, of course, but can he deliver? With the shares at the current level there cannot be much downside. At 179.5p they trade on a forward multiple of just 9 and offer a yield of over 5 per cent even after the dividend cut. Furthermore, the current market capitalisation of pounds 1.7bn values each Safeway store at just pounds 6.5m compared to pounds 22m even for William Morrison's. This is clearly an anomaly. The only trouble with anomalies is that sometimes they are justified. "Our stores are really empty," says Mr Criado-Perez. "I'm sorry to be blunt, but it is true". New brooms can say that sort of thing and they are clapped for doing so. If he's still saying it in a couple of years, he too may be walking the plank.

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