Supermarkets must close one in five stores

Analysts at Goldman Sachs have warned that Britain’s biggest supermarket groups must close one in five shops to turn around their performance. In a report on the grocery industry, Goldman said the retailers had to close stores in order to reduce their cost base. Analysts said this would then allow them to compete with Lidl and Aldi, and grow profits. “Our analysis of the UK grocery industry suggests capacity exit is the only viable solution for a return to profitable growth,” Goldman said, adding that store estates needed to be reduced by around 20%. The analysts said that if current trends continue then sales in large out-of-town supermarkets will fall by 3% every year until 2020. This would mean that sales in larger stores fall by 18% over the next six years. Separately, Chris Keen of CBRE said that grocery retailers had added 3.2m sq. ft. of space last year but were likely to reduce this to 2m sq. ft. next year. He said that supermarkets were allocating more space to non-food activities. "We'll see more space given up to concessions, to sublets, to things like gyms. Supermarkets will have more of a department store feel."