Do these supermarket shares offer growth potential? Tesco PLC, J Sainsbury plc, Ocado PLC and Morrisons PLC

Could these retailers offer high total return potential? Tesco PLC (LON:TSCO) (TSCO.L), J Sainsbury plc (LON:SBRY) (SBRY.L), Ocado Group PLC (LON:OCDO) (OCDO.L) and WM Morrison Supermarkets PLC (LON:MRW) (MRW.L)


While the prospects for the supermarket sector may be uncertain, I’m considering the investment potential of Tesco PLC (LON:TSCO) (TSCO.L), J Sainsbury plc (LON:SBRY) (SBRY.L), Ocado Group PLC (LON:OCDO) (OCDO.L) and WM Morrison Supermarkets PLC (LON:MRW) (MRW.L).

The outlook for the Tesco share price appears to be positive in my view. Sure, there are uncertainties in the retail sector and consumer confidence is at a low level. But with the company set to deliver further sales growth after nine successive quarters of positive LFL sales, I remain upbeat about its prospects.

The Booker acquisition could also have a positive impact on Tesco. It could allow the business to enjoy a more dominant position in the food services sector.

Sainsbury’s merger with Asda seems to have obvious benefits to the business. It could mean lower costs as well as cross-selling opportunities. It may also create a more dominant business in what could prove to be a sector that is ripe for consolidation.

With the Sainsbury’s share price still yielding over 4%, I believe it may offer good value for money. As a result, I feel its risk to reward ratio is appealing.

Morrisons has focused on low-investment growth opportunities in recent years. For instance, it has sought to grow its convenience store exposure by signing a deal with McColl’s for its Safeway products to be on sale throughout its estate.

This could act as a catalyst on the Morrisons share price over the medium term, while continued declines in net debt may create a more stable business for the long term.

Ocado’s business model may become more popular among investors over the medium term in my view. Shoppers are continuing to move online, and specifically to mobile. This could mean that the company’s technology is more useful for a wider range of retailers.

As a result, further partnership agreements may be signed, and this could lead to an improving financial performance for the business. Even though the Ocado share price may not be cheap, I think it could have growth potential.

About Robert Stephens 4030 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page