Iceland is among food retailers being squeezed as shoppers flock to discounters Aldi... Read More
The U.K. frozen-food chain’s 200 million pounds ($313 million) of 6.75 percent notes were at 76.18 pence on the pound today, according to data compiled by Bloomberg. The notes, which sold at face value four months ago, are the worst performing retailers in the Bank of America Merrill Lynch Sterling High Yield Index this quarter.
Iceland is among food retailers being squeezed as shoppers flock to discounters Aldi and Lidl. U.K. grocery sales are declining for the first time since at least 1994 amid a price war that’s undermining profits, according to Kantar Worldpanel data.
“Iceland has been cutting prices on a load of products and that’s been hurting their margins,” said Stuart Stanley, a money manager at Invesco Ltd., which has $790 billion of a
ssets under management and holds “a very small number” of Iceland’s bonds. “They’re at the center of a pretty severe price war.”
An external spokesman for Iceland, which is based in Flintshire, U.K., declined to comment on the bonds.
Kangaroo Burgers
Contestants on I’m a Celebrity are forced to eat insects and unusual animal parts to win food for their teams. Sales at Iceland, which offers kangaroo burgers and ostrich fillets to U.K. customers as part of a show-themed exotic meat feast, fell 0.8 percent in the 12 weeks through Nov. 9, Kantar data show.Aldi and Lidl are gaining market share from leaders Tesco Plc, J Sainsbury Plc and WM Morrison Supermarkets Plc, according to Kantar. Iceland’s market share was unchanged at 2 percent.
The cost of insuring against losses on Tesco, Sainsbury and Morrison debt jumped as much as 83 percent in the credit-default swap market since September.
Food prices fell 1.4 percent in October from a year earlier and have failed to rise on an annual basis for the past six months, the longest streak in 14 years, according to the Office for National Statistics. Prices retailers obtained for the goods they shifted last month fell 1.5 percent from a year earlier, the biggest decline since 2002, the ONS said today.
Grocers need to cut capacity, Goldman Sachs Group Inc. said this week. Iceland, which has more than 800 U.K. stores, is planning to open 40 more stores in 2014-15, according to its website.
Not Immune
“Iceland is a bit more expensive than the discounters so it’s not immune to what’s happening to the rest of the pack,” said Julien Martin, a fund manager at Aberdeen Asset Management Plc in London, which has about $519 billion of assets under management and holds some of the bonds. “It’s struggling to retain market share.”Iceland’s 400 million pounds of 6.25 percent bonds due July 2021 dropped to 77.63 pence on the pound, Bloomberg data show. These and the company’s 6.75 percent notes are among the lowest priced of the 153 securities in Bank of America Merrill Lynch’s high-yield pound index.
Moody’s Investors Service ranks Iceland’s debt at B1, four levels below investment grade. Standard & Poor’s rates the securities an equivalent B+.
Pound-denominated junk bonds lost 0.94 percent since June 30, while those sold by retailers lost 9 percent, index data show. Retail sales volume rose just 0.4 percent in the three months through October, according to the ONS.
“Disposable income in the U.K. hasn’t gone up while the cost of living has risen significantly,” said Tatjana Greil Castro, who helps oversee $25 billion as a money manager at Muzinich & Co. in London. “That makes it difficult for consumers to spend freely and that’s hurting retail businesses.”
For Related News and Information: Boparan Bonds Drop to Record as Profits Fall on Slow Growth U.K. Grocers Must Cut Capacity to Boost Profits, Goldman Says Tesco Bondholders Seeing Junk Join Shopper Exodus
No comments:
Post a Comment