EXTRA: Tesco Sales Confirm Christmas Trading Favoured Food Retailers

LONDON (Alliance News) - UK supermarkets have surprised the market with a stronger-than-expected ...

Alliance News 10 January, 2019 | 12:22PM
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LONDON (Alliance News) - UK supermarkets have surprised the market with a stronger-than-expected Christmas trading, beating analysts' most dire predictions, but not every food seller had reason to celebrate.

On Thursday, the shares of all the major listed grocers were trading higher - even those which posted less-than-positive news - after food retail sales figures over the festive period "proved to be less bad than many investors have feared", Fiona Cincotta, senior market analyst at City Index, explained.

The shares of Tesco PLC were up 0.9% with J Sainsbury PLC up 1.2%, Wm Morrison Supermarkets PLC up 1.2% and Marks & Spencer Group PLC up 1.2%.

However, the Christmas season was not merry for all London-listed grocers, with some emerging as winners and others left with wilting vegetables.

The highlight of a week of Christmas trading statements was provided by the UK's biggest supermarket by market share, Tesco, which on Thursday reported a strong trading performance.

For the six weeks to January 5, Tesco posted group like-for-like sales up 1.5% on the prior year.

In the UK & Republic of Ireland, Tesco's like-for-like sales were up 2.6%, "outperforming market in UK in both volume and value terms".

David Madden, market analyst at CMC Markets UK, said: "Low single digit sales growth may not be much, but it puts the firm well ahead of its well-established rivals. Adding to the respectable numbers, Tesco declared it is 'confident' in its outlook, and that it is 'bang on track to deliver' their plans."

In contrast to Tesco's figures, main rival Sainsbury's on Wednesday had reported a slight drop in third-quarter sales, blaming a harsh market.

For the 15 weeks to January 5, Sainsbury's said like-for-like sales excluding fuel fell by 1.1% as a minor increase in grocery sales, up 0.4%, was offset by a weak performance in the supermarket's general merchandise division, down 2.3%.

Analysts, following the disappointing sales figures, believe that the proposed Asda tie-up is necessary for Sainsbury's to return to growth. The UK supermarket number-two is currently in the process of merging with Walmart Inc-owned Asda, the third biggest, to create a new market leader larger than Tesco.

Meanwhile smallest of the 'Big 4' supermarkets, Morrisons, on Tuesday had said that for the nine weeks to January 6, like-for-like sales excluding fuel rose 3.6%. However, analysts were not impressed by Morrison's performance, which lagged consensus expectations.

Overall, discounters beat out their supermarket rivals, with figures from the latest Kantar Worldpanel grocery market survey showing that two thirds of UK households shopped at German discounters Aldi and Lidl in the 12-week-period to December 30.

On Monday, Aldi said it experienced its "best-ever Christmas trading" in the UK and achieved almost GBP1.0 billion in sales during December.

The discounter said it saw a strong influx of shoppers during the month of December as customers shunned more expensive food retailers. This meant that the week commencing December 17 saw a 10% sales increase on the prior year and was "Aldi's busiest-ever in the UK".

"The Christmas period is vital for the supermarket industry, and in recent years it has been a race to the bottom in terms of prices, which is great for the consumer, but not so good for the shareholder. Aldi and Lidl have acted as major disruptors, and the old guard has been shaken-up," commented CMC's Madden.

"The rise of Aldi and Lidl is hurting the 'big four' and that is why we have seen merger and acquisition activity in the sector. The German supermarkets are on the march, and the British firms will need to keep innovating in order to keep up."

On the other end of the price spectrum, upmarket food retailers reported a mixed performance in the festive period.

Waitrose, part of the John Lewis Partnership, on Thursday reported a 0.2% increase in like-for-like sales for the seven weeks to January 5. Just during the one week to December 29, Waitrose said sales rose 19%, helped by a surge in Christmas dinner shopping.

By contrast, Marks & Spencer's Food division's like-for-like sales fell 2.1% in the 13 weeks to December 29. M&S described its performance as "steady" amid a difficult trading environment.

Ian Forrest, investment research analyst at The Share Centre, said: "Christmas has produced some clear winners and losers in the retail sector and groceries have held up better than some other areas."

The latest British Retail Consortium–KPMG Retail Sales Monitor showed on Thursday that UK shopkeepers had the worst Christmas in a decade as sales registered no growth in December. Total sales were flat in the five weeks to December 29 compared to a 1.4% rise in the same period a year ago, marking the worst December sales performance since 2008 for the retail sector.

By Elena Cherubini; elenacherubini@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
Sainsbury (J) PLC 189.19 GBX -3.40
Morrison (Wm) Supermarkets PLC 197.91 GBX -1.19
Marks & Spencer Group PLC 204.20 GBX -2.67 -
Tesco PLC 231.30 GBX -2.28
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