Deputy City Editor
Kwik Save disappointed the market with a sharp fall in like-for-like sales yesterday and vowed to take the fight to the grocery superstores if the feared supermarket price war escalated. Battling talk from Graeme Bowler, the chief executive, wiped 69p from Kwik Save's share price, which closed at 609p, dragging the rest of the food retail sector lower - Sainsbury fell 12p to 391p and Argyll slipped 11p to 301p.
Mr Bowler said it was too early to say how long a recent resurgence in the supermarket price-cutting war would last. "We have got to see what happens through Christmas. We are in a very important trading period right now and this sort of activity is not unusual pre such a big spending period."
His comments accompanied a 7.4 per cent fall in pre-tax profits to pounds 125.5m in the year to July. The outcome was worse than expectations and prompted analysts to downgrade forecasts for this year and next. NatWest Securities, which had been expecting pounds 140m this year, has now pencilled in pounds 128.5m. Next year's pounds 160m estimate has been reined in to pounds 145m.
The profits fall was the first for Kwik Save, confirming the severity of problems on the high street, where the company is squeezed between the superstores, which are increasingly competing on price rather than range, and new entrants at the bottom, like Aldi and Netto.
One analyst said Mr Bowler was moving Kwik Save into the same position that Asda had taken up over the price war among the supermarkets: "He is saying that he will undercut any of the supermarkets, and he will probably win but there are such things as Pyrrhic victories."
Mr Bowler admitted that 350 of Kwik Save's smaller stores, more than a third of the 979-strong portfolio, were performing badly. Capital expenditure doubled in the year to pounds 200m, partly to fund a refurbishment programme for the problem shops, which Mr Bowler said had already reversed the sales fall in the redesigned outlets.
Although overall sales increased by 7 per cent to pounds 3.2bn, most of the improvement came from new openings and the acquisition last year of Shoprite. Volumes were 3.4 per cent down and price inflation ran at just 0.8 per cent over the year.
Profits were hit by a pounds 6m loss from the acquired Shoprite stores, the cost of closing down two distribution centres and other one-off property costs. Although earnings per share fell 10 per cent to 51.7p, the dividend rose 4 per cent to 20p.
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