This article is part of The Motley Fool's Diamond Jubilee Special! Alongside the rest of Britain, we're celebrating the Queen's 60-year reign -- but in our own Foolish way. In this series, we look at how the investing world has changed over the past six decades. Click here to read the introduction, complete with links to all the other articles in this series. Cheers, jubilant Fools!
LONDON -- The way we shop in the U.K. has changed enormously in the 60 years since the Queen ascended the throne in 1952, with the biggest upheaval (at least, until the Internet came along) probably being the advent of supermarkets.
There were plenty of complaints from small shopkeepers who couldn't compete, and many went out of business. But the supermarkets brought cheaper prices for Britain's consumers and, when listed on the stock market, also provided a way for investors to prosper from a retail revolution.
Let's take a look at the big four.
How little did Jack Cohen know what he was starting when he opened an East End market stall in 1919 and made a 1 pound profit from 4 pounds of sales during his first day of trading! From there, Jack made a deal with a firm of tea suppliers and launched the very first Tesco brand, Tesco Tea, in 1924 and never looked back.
The first Tesco store opened in 1929, and by 1947, Tesco (OTC: TSCDY) had become a listed stock market company with a flotation price of 25 pence per share. I bet Warren Buffett wishes he'd been in a position to buy Tesco shares back then, with the company since having risen to become the world's third-largest retailer by revenue after Wal-Mart and Carrefour.
Buffett has since topped up his shareholding, as explained in the Motley Fool's free report, "The One UK Share Warren Buffett Loves," after he judged the post-Christmas fall in the share price to be overdone. And who could argue with the Sage?
(Well, Neil Woodford did, and he doesn't like Tesco, but that just shows how even the top experts can disagree. If you want to know his preferences, the Fool's "8 Shares Held By Britain's Super Investor" report is what you'll want -- and it's free, too.)
Through organic growth and a string of takeovers, Tesco has grown to corner around a third of the U.K.'s grocery-shopping, and it has expanded internationally into Asia and the U.S. and into clothing, banking, and other ventures.
Considered a relative upstart by most, Wm Morrison Supermarkets
But it took a lot longer for Morrison to make it big. Its first self-service shop wasn't opened until 1958, when William's son Ken had taken over the family firm, six years into the new Elizabethan era. The first supermarket came along in 1961, followed by a stock-market flotation in 1967.
Morrison remained largely a Yorkshire outlet and didn't open its first store in the south of the country until as late as 1998. But since then it has grown to become a 7 billion pound company with annual sales of nearly 18 billion pounds (though that's still far behind the 65 billion pound turnover of Tesco, which is valued at 24 billion pounds).
The third of the FTSE 100 giants is J Sainsbury (OTC: JSAIY). Between the three of them, they account for nearly 2.5% of the FTSE 100's market capitalization. Sainsbury itself is valued at 5.4 billion pounds, with annual sales in excess of 22 billion pounds.
But where did Sainsbury start? You might be surprised to learn Sainsbury is even older than the other two, having been founded by John James Sainsbury and his wife Mary Ann in London in 1869. From initially selling fresh produce, the firm moved into tea and other packaged foodstuffs.
The firm soon went for a more upmarket look than people had come to expect from such early stores, with a clean bright appearance and uniformed staff. In fact, it is reported than when John James died in 1928, his last words were, "Keep the shops well lit."
The earliest-founded of the three, Sainsbury was the last to go public. Still wholly owned by the Sainsbury family at the time, 1973 saw the largest flotation on the London Stock Exchange to date, with the available shares snapped up in minutes -- and a million of them reserved for staff.
A look at the U.K.'s supermarket businesses can't be complete without at least a glance at Asda, even if we can't buy shares in it.
Asda started life as a public company with the name Associated Dairies and Farm Stores in Leeds in 1949, which brought together a number of Yorkshire farmers. And after a merger with Asquith Supermarkets, the current name was born -- Asquith and Dairies, you see.
After mergers with MFI and Allied Carpets and a couple of name changes, the firm went on to trade as Asda Group.
Asda struggled a bit during the 1980s, but the next decade saw its fortunes revived. In 1999 it was bought by Wal-Mart, a company on which it had modeled much of its modern business practice, for 6.7 billion pounds.
So what next?
Supermarkets have transformed the way we shop and brought enormous efficiencies to the food-supply chain, making life cheaper for all of us. But where do they go from here? The Internet is the current great retail transformation, but in the case of supermarkets, it seems more of a useful backup than a primary shopping channel, as most people prefer to visit the stores to see what's on offer -- at least for their food.
Tesco has been the quickest mover into online businesses, adding banking and other services, including the now-defunct Tesco Cars.
But the core business is still groceries, and it's bringing in strong profits for them all. Tesco is on a forecast dividend yield of 5% for fiscal 2013, with Morrison offering about 4.5%. Sainsbury's next payout looks to be approaching 6%, though a change to the dividend policy could see dividend growth lag behind earnings growth for the next few years.
Those are all good, solid dividends, and I'd expect decent share-price appreciation over the next 60 years, too. In fact, I wouldn't be surprised if Her Majesty has a few supermarket shares tucked away in her bottom drawer!
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