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Grocery stocks have plunged by up to 30% so far this morning as world stock markets went into freefall and the pound tumbled to a 30-year low after Britain voted to leave the European Union.
The FTSE 100 is down almost 500 points (7%) already in what is being labelled Black Friday as the UK defied bookies expectation with Brexit winning 52% of the vote. Banking and housebuilding stocks are the big losers so far but in retail WH Smith (SMWH) has been the biggest casualty plummeting 31% to 1,174p. The retailer’s growth in recent years has come exclusively from its travel division as airport passenger numbers have increased.
Marks & Spencer (MKS) is not far behind, falling 29% in the red to 260p. Associated British Foods (ABF) has tumbled 15% to 2,400p, Greencore (GNC) has fallen 15% to 273.8p, airport concession group SSP (SSPG) is down 14% to 274.3p, Cranswick (CWK) is down 13% to 1,951p and PZ Cussons (PZC) falls 12% to 299.1p.
The listed grocers were not immune from the panic, with Sainsbury’s (SBRY) dropping 12% to 215.5p, Ocado (OCDO) down 11.8% 223.1p, Tesco (TSCO) saw yesterday’s good work wiped out falling 9% to 152.9p, Morrisons (MRW) down a more modest 4.4% to 181.2p.
All other stocks in The Grocer 25 are also in the red.
A note from Jefferies this morning said Tesco and Morrisons were likely to benefit from an expected hike in food inflation – Sainsbury’s would offset by Argos dilution.
Madeleine Thomson, retail & consumer lead for PwC said the impact on retailers and consumer prices in the wake of the vote remained to be seen. “Whilst we may see a short-term impact in consumer confidence, most businesses will have a contingency plan in place and there is no reason why long-term success should be impacted by the referendum outcome.
“In our recent Retail CEO survey, conducted ahead of the vote, 43% of respondents said their growth plans were not at all dependent on staying in the EU. While currency impacts causing prices to rise or margins to be squeezed and the impact on imports from the EU were highlighted as the top concerns of CEOs.”
Julie Carlyle, EY’s retail sector leader, added: “The uncertainty that the leave result brings may mean that consumer spending is tempered in the short term. This exacerbates the strain that retailers are already under from the ‘margin vice’ of deflation, national minimum wage as well as required investment in infrastructure. For many retail businesses, the impact of any further devaluation of sterling will have a significant impact on the costs in the supply chain although the silver lining for some luxury retailers will be a boost from overseas spend.
“Retailers will further be considering the impact on their labour force in the longer term, especially within distribution and logistics where there are a significant number of EU employees, as well as the yet unknown impact on trade tariffs.”
CBI director-general Carolyn Fairbairn said: “The British people’s vote to leave the EU is a momentous turning point in our history. The country has spoken and it’s for us all to listen. Many businesses will be concerned and need time to assess the implications. But they are used to dealing with challenge and change and we should be confident they will adapt.
“The urgent priority now is to reassure the markets. We need strong and calm leadership from the Government, working with the Bank of England, to shore up confidence and stability in the economy.”
Morning update
Outside of the EU referendum there is little else news flow on the stock exchange this morning.
Elsewhere on thegrocer.co.uk, there is the story that seafood supplier Simsons Fisheries has been snapped up out of administration by rival business James Knight of Mayfair, saving the jobs of all the staff. Read the story here.
Yesterday in the City
As Britons headed to the polls to decide on the future of its EU membership, the FTSE 100 rallied 1.2% to a two-month high of 6,338.10 point as optimism swept the market that Remain would win out.
Tesco finished the day 1.8% higher at 169.5p – and had been as high as 174p in early trading – after the supermarket reported its second consecutive quarter of like-of-like growth – the first time it has done so in more than five years.
Other stocks to also get a boost included Conviviality (CVR), which climbed 4.7% to 208p, Hilton Food Group (HIG), up 3.5% to 531.5p, and perennial climber Fever-Tree (FEVR), up 2.1% to 715p.
Nichols (NICL), McColl’s (MCLS), and Greencore (GNC) were only a handful of stocks in the red, falling 1.2% to 1,439.3p, 1.1% to 140.5p and 1.1% to 320.6p respectively.
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