It is not often that supermarket boardrooms get as much scrutiny as their shop floors, but JP Morgan thinks investors should pay just as much attention to management as to margins.
The bank’s latest European food retail review makes the case that corporate governance (the quality of leadership, pay structures and insider behaviour) can be just as telling a guide to future returns as sales growth or cash flow.
Among the UK names, Tesco PLC (LSE:TSCO) and J Sainsbury PLC (LSE:SBRY) emerge as the best managed.
Both consistently meet performance targets and align executive pay with delivery. Tesco has even nudged its outlook higher, suggesting confidence in trading momentum after years of cost-cutting and strategic resets.
Sainsbury, meanwhile, “continues to raise the bar”, according to analyst Borja Olcese, supported by steady execution and an improving food business.
Others fare less well. Discount chain B&M European Value Retail SA (LSE:BME) missed its long-term incentive plan (LTIP) targets for the 2025 financial year, meaning no awards were paid, and short-term bonus goals were revised down mid-year.
Across the Channel, Ahold Delhaize, owner of the Stop & Shop and Albert Heijn chains, hits its marks but, JP Morgan notes, has “easier” targets than in previous years, particularly on like-for-like sales growth.
Carrefour also ticks the boxes on paper, but its return on investment is deteriorating.
A recurring concern is that management teams often achieve their LTIP awards even when missing financial guidance or eroding shareholder value. Carrefour is cited as the clearest example of that disconnect.
For the UK supermarkets, though, governance looks like a relative strength. Both Tesco and Sainsbury have combined credible financial delivery with clearer alignment between management incentives and shareholder interests, a mix that may help them withstand what remains a tough backdrop for grocers.
JP Morgan keeps “overweight” ratings on both, suggesting that, in a sector where boardroom decisions can make or break investor confidence, Britain’s big two are currently setting the standard.