Food retailers and suppliers enjoyed a share price resurgence in March despite the weak performance of the FTSE All-Share.
Inverting the January picture, when Tesco’s profit warning meant the grocery sector lost value as the FTSE All-Share improved, last month the FTSE Food & Drug Retailers Index grew 4%, while the FTSE declined 1.5%. Food manufacturers also outperformed the market, with the FTSE Food Producers & Processors Index climbing 2%.
This was reflected in some strong financials in the grocery sector. Sainsbury’s shares rose 5% during March to 311.3p after the supermarket reported better than expected quarterly like-for-like sales growth of 2.6%.
Tesco also had a better month. Its share price rallied 2.5% to 327.9p as Kantar reported that the supermarket’s sales growth rate - at 2.7% for the 12 weeks to 18 March - had improved on earlier snapshots this year.
Even struggling confectioner Thorntons had a good run. Despite reporting a slump in half year pre-tax profits in February from £8.3m to £618,000, its share price edged up 2.75p to 26.25p in March. This week, the shares enjoyed another healthy spurt, climbing to 31p on Wednesday morning amid speculation of a private equity bid.
The strong performance of the food retailers had a positive trickle-down effect on suppliers. Anglo-Dutch heavyweight Unilever ended March 11p higher at 2,064p as investors refused to be put off by Investec’s first downgrade of the stock in 17 years.
Troubled British food giant Premier Foods also had a good month. The company’s share price climbed from 11.25p at the beginning of March to 16.35p on Wednesday morning as buyers sought out value growth potential and reacted positively to market speculation that a number of private equity firms were interested in bidding for its non-core brands.
However, analysts have warned that the recovery in Premier’s share price may have run its course. “We believe that given the size of its outstanding debt position and the onerous terms with its banks, as well as its large pension deficit, there may be value for equity holders, but it seems many years away at the moment,” said Panmure Gordon analyst Damian McNeela.