The U.K.’s supermarkets are likely to write down the value of their property assets by billions of pounds as a result of the fall in sales at the major retailers, according to analysts.
Tesco, in particular, is likely to write down valuations by £1 billion, the analysts say. Meanwhile, Morrison and Sainsbury already reported £1 billion of write-offs last year, and more could follow if sales continue to fall.
JP Morgan Cazenove analyst Jaime Vazquez called a £1 billion writedown on the value of Tesco’s properties “a very safe minimum.” Sanford Bernstein analyst Bruno Monteyne also expects a writedown of that amount, possibly rising to £2 billion.
Store closures are also a possibility. Supermarkets have spare capacity after opening stores at a record rate over the last 10 years. Mr. Vazquez said adjustments were needed after recent excesses, requiring “price cuts, store closures and balance-sheet recapitalizations.”
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