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Sales across the grocery industry rose 1.3% during the past 12 weeks as the industry emerged from the shadow of tough summer 2018 comparisons.
The latest market share figures from Kantar showed an improvement from the 0.5% growth recorded in September’s release of 12-week figures, which itself was a return to growth after a difficult summer.
Kantar’s latest figures show Sainsbury’s (SBRY) was the first of the big four to return to growth in the period, as it posted growth of 0.6% and a market share of 15.3%.
The performances of Tesco (TSCO), Asda and Morrisons (MRW) all improved compared with last month, but sales are still down year on year. Tesco lost 0.2% of sales in the period, while Asda was down 0.9% and Morrisons dropped 1.8% to see its share fall below 10% to 9.9%.
Aldi and Lidl grew by 7.3% and 8.2% respectively to take their combined share to 14.1%, while Co-op continued to grow strongly with a 3.9% uplift and Ocado (OCDO) continues to be the fastest growing grocery retail player with growth of 13.3%.
Fraser McKevitt, head of retail and consumer insight at Kantar, commented: “The grocery market seems to have finally edged out from under the shadow of 2018 and tough comparisons with the strong summer sales of last year. “
“Well-documented concerns about the availability of popular products in the event of a no-deal Brexit have not yet translated into a consistent increase in purchasing. While a quarter of British consumers say they are considering stockpiling, it seems they are waiting to see how the next few weeks play out and we expect if they take any action it will be closer to the deadline if a chaotic trading situation looks increasingly likely.”
The proportion of sales on promotion increased for the first time in nearly four and a half years this period to 32.3%, driven by Tesco’s ‘100 years of value’ campaign and Sainsbury’s ‘Price Lockdown’.
Kantar found that grocery inflation now stands at 0.8% for the 12-week period ending 6 October 2019, with prices rising fastest in markets such as canned fish, crisps and frozen fish, while falling in canned cola, instant coffee and chilled fruit juices.
Meanwhile, Nielsen found that the first wave of autumnal weather in the UK had dampened grocery sales momentum, with growth slowing 1.7% in the last four weeks.
This is the lowest growth for UK supermarkets in September in two years.
Before the autumnal weather took hold in early October, sunny weather in the first weeks of September boosted sales in soft drinks (+2.7%), followed by crisps and snacks (+2.3%) and frozen foods (+2.1%). In contrast, general merchandise sales fell by 4.7%, suggesting a weakness in discretionary non-food spend.¹
In terms of retailer performance over the last 12 weeks, sales at Tesco and Sainsbury’s remained broadly flat, whilst Asda and Morrisons experienced a slight decline. Sales at the discounters Aldi and Lidl continued to grow but at a slower rate than earlier this year.
Mike Watkins, Nielsen’s UK Head of Retailer and Business Insight, said: “With volume sales still in decline at 0.6% in major UK supermarkets, it’s clear that shoppers are continuing to hold back spend. Against a backdrop of simmering economic uncertainties and the looming deadline of Brexit, as well as the UK having its lowest food inflation rate since April 20183, retailers are finding it more of a challenge to drive topline sales.”
“Though many retailers are starting to introduce price cuts to help regain momentum after the unpredictable summer, it is evident that retailers will need to invest more heavily in promotional and advertising activity if they want to have the best chance of success in the run up to the seasonal shopping period. This should help lift consumer buying momentum and kick start Christmas and seasonal shopping.”
Morning update
Pub group and brewer Marston’s (MARS) has released a pre-close trading update for the year to 28 September, warning the market profits will be lower than expected due to weaker food sales.
The group will post a 3% rise in total turnover to £1.2bn.
Marston’s said it anticipates reported EBITDA will be broadly flat year on year and underlying profit before tax will be around £101m as higher operating profits in its Taverns and Beer businesses are offset by lower earnings in Destination and Premium.
Total pub sales increased 3%, including like-for-like sales growth of 0.8% and the contribution from its pub expansion programme. In the most recent 10 weeks, like-for-like sales were up 1.9%.
Wet-led Taverns pubs performed strongly with managed and franchised like-for-like sales growth of 1.9% including growth of 5.4% in the last 10 weeks.
Its Destination and Premium business saw like-for-like sales growth of 0.1%, reflecting stronger drink sales offset by lower food sales. The division’s operating margins will be below last year reflecting increased margin investment and higher labour costs as a percentage of sales.
Its brewing arm Marston’s Beer Company saw total volumes grow 1% for the period, building on an “outstanding year for brewing last year”.
Marston’s said it increased stock levels as part of its Brexit-preparedness planning and is “confident that the group is as prepared as it can be for a potential no-deal Brexit on 31st October and we have implemented our contingency plans to ensure we can best service our customers over the key Christmas trading period.”
In 2020, a 53rd trading week will offset the impact of the step-up in securitised interest. Following a review of operational plans for 2020, Marston’s is proposing to invest an additional £2-3 million in pub training, localised pub team incentive initiatives and digital marketing investment.
In addition, the group is seeking to accelerate its stated debt reduction target of £200 million by 2023 and is increasing its disposals guidance from £40m to £70m for the current financial year.
Underlying profit before tax in 2020 to be at a similar level to 2019, reflecting growth in underlying operating profits offset by increased disposal activity, additional pub investment and higher interest charges.
CEO Ralph Findlay commented: “Our drinks businesses have performed well, achieving further growth against an exceptionally strong 2018. Wet-led pubs have led the charge continuing their positive trajectory and food pubs have achieved modest sales growth.”
“Operationally, we remain focused on further improving our proposition and plan to make additional investment in both our pub teams and digital marketing in the forthcoming year.
“Our principal focus is on reducing our net debt by £200 million and creating a high quality business that is cash generative after dividends and capital expenditure. We are making encouraging progress and have decided to increase the pace of our disposal programme this year to accelerate the achievement of this target.’’
Marston’s shares have plunged 10% back to 109.8p on the back of the profits warning.
Elsewhere, the FTSE 100 is up 0.1% to 7,221.2pts so far this morning.
Early risers include Associated British Food (ABF), up 2.7% to 2,245p, Ocado (OCDO), up 2.6% to 1,336.5p and Greggs (GRG), up 2.5% to 1,828p.
Fallers include Coca Cola HBc (CCH), down 0.6% to 2,510p, PayPoint, down 0.6% to 885p and Diageo (DGE), down 0.5% to 3,213.8p.
Yesterday in the City
The FTSE 100 slumped 0.5% back to 7,213.4pts as Friday’s optimism about a Brexit deal being achieved before 31 October took a hit over the weekend.
Ocado (OCDO) fell back 1.5% to 1,302.5p after broker JP Morgan said the stock’s value was “already stretched” after its rapid rise following the signing of a number of international supply deals.
Cake Box Holdings (CAKE) dropped 2.9% to 165p despite announcing that first half sales rose 6% to £8.8m amid continued store expansion.
Other fallers yesterday included Domino’s Pizza Group (DOM), down 3.8% to 252.8p, C&C Group (CCR), down 3.8% to 355p, Bakkavor, down 3% to 128p, Nichols (NICL), down 2% to 1,587.5p, Greggs (GRG), down 2% to 1,784p and SSP Group (SSPG), down 1.8% to 647p.
Risers yesterday included Premier Foods (PFD), up 5% to 31.8p, McBride (MCB), up 4.2% to 67.8p, Applegreen (APGN), up 3.2% to 522p, PayPoint (PAY), up 2.8% to 890p, Stock Spirits Group (STCK), up 2.4% to 212p and Cranswick (CWK), up 1.9% to 3,298p.
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