Major UK retailers take a hit over Christmas
Sales volumes down at big four supermarket groups
London — Morrisons was the big loser as Britain’s major food retailers endured their worst Christmas since 2014, hit by intense competition and sustained consumer uncertainty which put shoppers off splashing out.
Industry figures from market researchers Nielsen and Kantar showed sales at all four big British supermarket groups — market leader Tesco, Sainsbury’s, Walmart-owned Asda and Morrisons — fell in the 12 weeks to the end of December. They continued to lose market share to German-owned discounters Aldi and Lidl.
Both data sets showed Morrisons was the industry laggard and its trading statement confirmed a weak performance.
Nielsen said British supermarkets’ total sales over the four weeks to December 28 rose just 0.5% from 2018, the lowest sales growth over the Christmas period in five years. It said that while shoppers visited supermarkets more often, they bought fewer items and spent less each time.
“There was no sign of the post-election rush many had hoped for in the final weeks before Christmas, with shoppers carefully watching their budgets,” said Fraser McKevitt, head of retail and consumer insight at Kantar.
He said consumers cut back on traditional and indulgent festive classics, with sales of Christmas puddings down 16%, sparkling wine sales down 8% and turkey sales down 1%.
The Morrisons update showed its underlying sales, excluding fuel and sales tax, fell 1.7% in the 22 weeks to January 5, a period that included the group’s third quarter and the nine-week Christmas trading period.
“Throughout (the period), trading conditions remained challenging and the customer uncertainty of the last year persisted,” CEO David Potts told reporters.
“The market was also highly promotional (and) collectively more competitive, especially in areas such as beers, wines and spirits, fuel and in-store coupons,” he said.
UK pay growth has slowed since the middle of 2019, a year characterised by political uncertainty in the run-up to several Brexit deadlines and the December 12 national election.
Potts said there would be uncertainty in the grocery market until the terms of Britain’s exit from the EU become clearer.
Better than feared
Performance at Morrisons was, however, better than feared, with analysts forecasting a decline of 2.2% from the year earlier period. The firm said it still expected 2019-2020 pretax profit within the range of analysts’ forecasts of £400m to £431m, up from £396m in 2018-19, thanks to the tight management of costs.
The Morrisons share price was up 2.2% on Tuesday morning, reversing Monday’s losses and paring losses over the last year to 10%.
The run-up to Christmas marks the most important and competitive time of the year for British supermarkets.
In recent years all four major groups have had to fight off the challenge from Aldi and Lidl, which are continuing to open new stores at a rapid pace. The discounters are also selling more premium products, making them more competitive over Christmas.
Kantar said that Aldi and Lidl’s combined market share of 13.7% was more than treble what they held in December 2009.
On Monday, Aldi UK reported a 7.9% increase in total sales for the four weeks to December 24 and said its like-for-like sales were positive.
The Nielsen and Kantar data showed Sainsbury’s as the least worst performer, followed by Tesco and Asda. Online seller Ocado maintained its position as Britain’s fastest growing grocer with sales growth of 12.5%, Kantar said.
The Sainsbury’s share price was up 1.6%, while Tesco was up 0.6%.
Sainsbury’s, which is trying to rebuild confidence in its strategy after a botched attempt to take over Asda, updates on trading on Wednesday, followed by Tesco and Marks & Spencer on Thursday.