When Tesco sneezes, the grocery trade catches a cold. That is how the City reacted on Thursday to Tesco’s announcement that like-for-like sales in the UK had fallen 2.3% in the six weeks to 7 January. Shares slumped 15% over the morning, sparking a sell-off across food retail.
Sainsbury’s and Morrisons were dragged down in the melée, both falling by more than 5% in Thursday morning trading. Sainsbury’s CEO Justin King will be especially aggrieved having enjoyed what he described as the supermarket’s “best Christmas ever”, with like-for-like sales up 2.1% [excluding fuel] in the 14 weeks to 7 January.
Even Booker was unable to reap the rewards from another inflation-busting set of results. Shares in the wholesaler were static on Thursday despite like-for-like sales growth of 6.5% for the 16 weeks to 30 December, and the announcement of Chef Direct, a new facility supplying major customers in its growing foodservice unit from June.
Booker has been the outstanding stock market success story in grocery retail in the past three years. The share price rose by 25% over the past year alone. Another top performer was Morrisons, with shares up 20% in 2011. The upward trend came to an abrupt halt this week. Like-for-like growth of just 0.7% in the six weeks to Christmas was judged lacklustre - shares drifted on Monday when the news came in and shot down further on Thursday after Tesco’s results were published.
Tesco was not the biggest faller of the week. Thorntons slid over 46% this week after sales figures over the crucial Christmas trading period failed to match expectations. Thorntons shares have slumped from just under 100p in January 2011 to 10p this week as tough conditions and competition from Hotel Chocolat ate into sales.
The only bright spark this week came from Ocado. Having taken a battering at the end of 2011 following a profit warning in mid-December, its share price rallied almost 27% this week on news of a 16% increase in sales in the four weeks before Christmas. JP Morgan, Ocado’s house broker, said the improvement, partly a result of a pause in on-site development work, illustrated that “the operating model isn’t broken but simply behind schedule”. Still, at 74p on Thursday evening Ocado’s share price remained a long way behind its 52-week high of 285p.