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Supermarket sales plunged by 5.9% in the 12 weeks to 17 April, according to the latest market share data from Kantar, as consumers prioritised value amid soaring inflation.

Notably, for the first time since the pandemic began, sales were also down by 0.6% on a two-year basis, as the period now includes the start of the first lockdown which boosted grocery sales.

The sales plunge comes amid grocery price inflation of 5.9% during the current month, which is its highest level since December 2011.

Fraser McKevitt, head of retail and consumer insight at Kantar, commented: “The average household will now be exposed to a potential price increase of £271 per year. A lot of this is going on non-discretionary, everyday essentials which will prove difficult to cut back on as budgets are squeezed.

“We’re seeing a clear flight to value as shoppers watch their pennies.”

This trend saw Aldi as the fastest growing retailer this period, with its sales up by 4.2% over the 12 weeks to 17 April, followed by Lidl which was up 4%. More than one million extra shoppers visited Aldi and Lidl over the past 12 weeks compared with this time last year, with Aldi’s market share growing to a record 8.8% and Lidl 6.6%.

Tesco saw the least steep sales drop of the mults, with sales down 4.8% compared to 7.7% at Sainsbury’s, 10.3% at Asda and 10.5% at Morrisons.

Only Tesco is now in two year growth (of 1.3%), with Morrisons and Asda down 4% and 3.1% respectively.

Other grocers to see sales decline included Co-op (down 7.8%), Waitrose (down 9.2%) and Iceland (down 7.5%).

Ocado saw a 10.7% sales drop during the three month period, to slash its two year growth to 13.9%.

Kantar noted the level of products bought on promotion, currently at 27.3%, has decreased 2.7 percentage points as everyday low price strategies come to the fore.

It also suggested that this month’s numbers should also be considered in the context of lockdown easing. Sales over the latest four weeks fell by 4.1% as people returned to the office, as well as restaurants and pubs.

McKevitt added: “It is to be expected that sales are down compared with last year when restrictions were still in place. While the number of trips we’re making to the supermarket has remained steady this year, people aren’t buying as much when in store and the average basket size has dropped by 4.5% to £22.39.”

Online grocery sales were down by almost 15% compared with 2021 and over April online’s share dipped by 1.5 percentage points.

Other grocers to see sales decline included Co-op (down 7.8%), Waitrose (down 9.2%) and Iceland (down 7.5%).

Ocado saw a 10.7% sales drop during the three month period, to slash its two year growth to 13.9%.

Over the longer 12-week period grocery inflation reached 4.8%, with prices are rising fastest in markets such as dog food, fresh lamb and savoury snacks, while falling in spirits.

Morning update

Associated British Foods has posted a strong rebound in first half sales and profits, driven by ending of Covid restrictions on its Primark business as well as a “resilient” performance in food.

Revenue for the Group of £7.9bn was 25% ahead of last year at actual exchange rates and adjusted operating profit of £706m was 91% ahead.

These half year sales and adjusted operating profit both returned to the pre-COVID levels reached in the half year to 29 February 2020, driven by a strong recovery in sales and operating profit margin at Primark where trading was much improved following the relaxing of most government restrictions on store operations.

Statutory operating profit for the period of £686m increased by 114%.

ABF said its foods business had shown a “resilient operational performance”, with sales up 6% to £4.3bn and adjusted operating profit down 9% to £330m

It said that it had suffered from high input cost inflation, logistics challenges, COVID-related labour absences during the period.

Therefore it had taken cost reduction and pricing action, but there had been a lag in recovery of cost inflation which hit its bottom line.

Grocery revenue in the first half was 2% ahead of last year in the face of a number of challenges as retail volumes returned to more normal levels after the COVID lockdowns last year, operating constraints this year as a result of supply chain disruption and COVID-related absences, and Allied Bakeries exiting the Co-op contract in April last year.

AB Sugar traded strongly in the first half with revenue driven by both higher domestic sales volumes in Illovo and Azucarera and higher sugar and bioethanol prices. ABF said this period is the next step in the recovery of profit with an increase of 8% over last year.

Primark sales were up 59% to £3.5bn, with an adjusted operating profit margin of 11.7% with the recovery driven by the UK and Ireland and the increased holiday travel and socialising.

CEO George Weston commented: “This half year sales and operating profit for the Group returned to pre-COVID levels. Our people have responded well to the many challenges we faced.

“Our food businesses have once again proved their operational resilience and Sugar had another strong period, building on its recent track record of recovery. Measures to mitigate higher costs in all our businesses have been taken and more are planned. Primark delivered a significant increase in sales and profit, with stores now open and trading largely free of restrictions.

“Looking further ahead, inflationary pressures are such that we are unable to offset them all with cost savings, and so Primark will implement selective price increases across some of the autumn/winter stock. However, we are committed to ensuring our price leadership and everyday affordability, especially in this environment of greater economic uncertainty.”

It noted that commodity and energy prices have increased following the Russian invasion of Ukraine and, as a result, it now expects a greater margin reduction in these businesses than previously expected for the full year.

However, despite the inflationary pressures, its outlook for the year is for significant progress in adjusted operating profit and adjusted earnings per share for the group.

Elsewhere, Tesco has kicked off its latest £750m share buyback programme announced at its annual results earlier this month.

It has entered into an agreement with Citigroup Global Markets Limited to repurchase up to £750m shares on behalf of the company by April 2023.

The sole purpose of these share purchases is to reduce the company’s share capital, it said.

Meanwhile, Finnish dairy group Valio announced the sale of its Russian operations to Velkom Group effective immediately.

With the transaction, Valio’s personnel in Russia will transfer to Velkom Group. The parties have decided not to disclose the value of the transaction.

With the completed transaction, Valio’s operations in Russia have now ended.

The transaction includes Valio’s Russian operations and the processed cheese factory in Ershovo. The Viola brand processed cheese sold and produced in Russia is also part of the transaction.

In 2020, Valio’s net sales in Russia were €87m and accounted for approximately 5% of Valio’s global net sales of about €1.8bn.

Valio CEO Annikka Hurme commented: “Russia’s attack on Ukraine made it impossible to continue our operations in Russia, both ethically and from a business perspective. Exiting from Russia has proved difficult in this situation because of the constantly changing legislation and the reciprocal sanctions.

“We have sought out solutions and a suitable buyer throughout spring. With the transaction, we will complete this process and our operations in Russia will end.”

On the markets this morning, the FTSE 100 is back up 0.7% to 7,429.1pts.

Risers include Just Eat, up 2.7% to 2,177.5p, Coca-Cola HBC, up 1.9% to 1,670p and Diageo, up 1.8% to 4,008p.

Fallers include ABF, down 2.9% to 1,582.9p, Deliveroo, down 2.2% to 109.5p and Ocado, down 1.6% to 1,019.5p. 

Yesterday in the City

The FTSE 100 closed yesterday down 1.9% at 7,380.54 amid concerns over the Covid situation in China.

McColl’s plunged 55% back to just 1.78p after it warned of an Easter slowdown in trading and that its financial rescue talks are likely to wipe out the value of its shares.

Other fallers included Imperial Brands, down 4% to 1,622.5p, Domino’s Pizza Group, down 2.3% to 350.4p, Hotel Chocolat, down 1.9% to 390p, British American Tobacco, down 1.9% to 3,277p and Greencore, down 1.4% to 117.1p.

Despite the market falls there were a number of consumer risers, including THG, up 9.8% to 116.3p following its annual results and trading update last week.

Also on the up were Bakkavor, up 5.4% to 109p, Glanbia, up 4% to €11.12, Unilever, up 1.9% to 3,606.5p, Greggs, up 1.4% to 2,380p, Deliveroo, up 1.4% to 112p, C&C Group, up 1.2% to 207.4p and Tesco, up 1.1% to 268.6p.