Supermarket Woes!

Morrison @ 173.6p, +0.50p (+0.29%)

Tesco @ 246.25p, -1.75p (-0.71%)

Hugely disappointing to see my 2 supermarket holdings ploughing new lows, and each time I think they may be have reached the bottom they have continued to sink further, with continuing speculation that dividends cuts might yet be coming.

The Tesco perspective is based upon a typical, bring out your dead view, that an incoming executive might undertake to give himself a clean slate, release cash, and give themselves the best chance of enhancing their reputations.

I tend to disagree with 2 of those 3 drivers, and have obvious concerns about loyalty and creating a legacy.

Morrison's is an even bigger concern given the mismanagement of resources and lack of coherent strategy (except for catch up), that started with the last CEO Marc Bolland, who proceeded to jump ship for M & S before completing the task, succeeding in doing little more that introduce a change (for change's sake?), that appeared to focus on areas that Morrison's were omitting to compete with rivals, online offerings etc.

The biggest travesty of all being the temporary prop provided by a £1bn share buyback program that drew on Morrison's cashflow and borrowed more funds to do it.

Warren Buffett has spoken many times about the poor track record of company execs to manage share buybacks, often wasting spare cash to buy shares at historical highs rather than value enhancing lows, and that a direct return of cash is much the more honest of the options when a board has not real idea what to spend the cash on.

So whilst I have dithered and attempted to maintain my buy and hold strategy, I really need to decide if the supermarkets can merit a place in that strategy, currently it seems not.

They will come back one way or another and whilst I thought both my picks had individual strengths that would buy them time to turn things around it seems not to be the case and management of either seem to be missing grocery retail expertise.

I also hold the view that a recovering economy will see a more normal looking retail profile with the basics less of priority and a better experience proving a draw.

I also think the discounters margins and strengths will weaken as they themselves try to bridge the gap in customer shopping experience with the established brands. 

However, am I prepared to give my holdings that chance?