Comment: Activist investor interest in grocers' property is unwelcome distraction

You’d think the property boom days were well and truly back judging by the hopes of activist investors to force a supermarket property restructuring. 

It was reported in last weekend’s Sunday Times that US investors intend to agitate for Morrisons, Sainsbury’s and Tesco to spin off their property into separate quoted businesses and sell stakes.

The idea has a Groundhog Day feel, recalling the days when sale and leaseback deals seemed like a licence to print money. But, other than to a limited extent, those days are gone. The grocers’ giant sheds, once seen as an advantage, are in today’s multichannel environment often viewed as a potential millstone, evidenced by Tesco’s need to find a purpose for excess space in its Extra estate.

Food retail is tough generally, as was starkly clear from the quoted grocers’ Christmas updates, and the attention of the US activist funds – which at present only hold small stakes – is an unwelcome distraction. 

It makes little sense for the supermarkets or their investors to bear further margin pressure as a result of selling properties on which they will pay rent that is only likely to go in one direction – up.

Carpetright’s Dutch woes

Carpetright’s sales in the Netherlands might be described, like much of Holland, as being below sea level, and the upshot of troubled trading in the country was a profit warning.

However, Carpetright’s update was not completely depressing. Boss Lord Harris said that it was difficult to forecast how the year will turn out and the pace of recovery in the UK remains uncertain. Nevertheless, in the domestic market full-year profit is likely to be ahead of last year.

At least the retailer’s self-help measures are enabling it to plug one hole in the dike, although the wider waters look perilous and Carpetright remains a sell for many.