Food sales jump drives 1.4% retail sales growth in March

Morning update

The latest BRC-KPMG Retail Sales Monitor shows UK retail sales increased by 1.4% in March on a like-for-like basis, driven by a 4.2% jump in like-for-like food sales.

On a total basis, sales rose 2.3% in March, against a decline of 0.2% in March 2017. This is above the three-month and 12-month averages of 1.8% and 1.9% respectively, but is positively distorted by the timing of Easter.

Over the three months to March, in-store sales of non-food items declined 3% on a total basis and 4% on a like-for-like basis. On a 12-month basis, the total decline was 2.2%.

Food sales over the three months to March, increased 4.2% on a like-for-like basis and 5.3% on a total basis. This is the strongest three-month average since July 2009 and above the 12-month total average growth of 4.4%, which itself is the highest since March 2012.

Non-food sales over the three-months to March decreased 1.8% on a like-for-like basis and 1% on a total basis.

Online sales of non-food products grew 7.9% in March, against a growth of 6.6% in March 2017. This is above the three-month and 12-month averages of 6.6% and 7.8% respectively. Online penetration rate increased from 20.6% in March 2017 to 22.0% in March 2018.

Helen Dickinson, chief executive, at the British Retail Consortium, said: “March paints a volatile picture for sales, which experienced peaks and troughs to deliver some modest growth on last year. The positive distortion from the timing of Easter pushed sales up by over 15 per cent during the holiday week compared with the rest of the month, only just making up for a sub-zero performance at the start of the month.

“There’s no doubt that the ‘Beast from the East’ and its successor played a significant role in deterring shoppers from making store visits. But it didn’t dampen consumers’ appetites towards food purchases, which saw the anticipated spike from the Easter festivities. This was in stark contrast to non-food sales which, despite some promotional- driven activity, bore the brunt of consumers’ disinterest in typical Springtime purchases, as well as the ongoing spending squeeze on non- essentials.

There was hope that, with the gap between inflation and wage growth finally narrowing, consumers’ purse strings would slacken to some extent. But the grip on spending power would persist over the course of the year.

“So with the success of Brexit as the determinant of what we pay for products in 2021, the deal negotiated in the next six months needs to focus on reducing potential customs friction on the movement of goods between the UK and EU-27,” said Dickinson

Paul Martin, Head of Retail, KPMG added that March was difficult for large parts of the UK retail industry. Seemingly endless cold weather dissuaded would-be shoppers from the high street and a number of retailers delivered bad news. Great hopes were placed on Easter trading, but while the latest figures pointed to overall improvement when compared to recent months, the Easter boost did not quite measure up to previous years.

“The divide between food and non-food sales became further pronounced, with food clearly the winner. This came at the expense of other categories, with few others noting growth.

“Retailers with an online presence were far more fortunate, with a marked lift in all categories. The cold weather clearly persuaded shoppers to peruse from the comfort of their own homes, with beauty and clothing grabbing the most attention.

“The start of 2018 has already seen a list of casualties, and with trading conditions unlikely to change in the short-term, retailers are increasingly having to be clear on their point of differentiation. It appears that unless you’re a grocer, bridging the gap between online and off-line sales offers the best means of success in this climate,” he said.

Joanne Denney-Finch, chief executive, IGD said: “Spring performance is often hard to judge, with varying Easter dates making for difficult year on year comparisons. The bad weather conditions businesses have faced this season add further complexity - April trading may give us a clearer picture.

“Despite this, UK grocery retailers reported growth last month. Price change continues to provide some support, but there are now signs that inflation is slackening, both in the grocery market and wider economy. This, coupled with rising wages, may encourage shoppers to spend more as the year progresses.

“For now, IGD’s most recent ShopperVista data suggests that most remain cautious about economic outcomes. Value-seeking behaviour is actually becoming more common, with 46 per cent of shoppers saying they always look for the cheapest products even if it takes time to find them (up from 40 per cent in March 2017).”

Morning update

Eddie Stobart Logistics (ESL) has posted a 12% fall in pre-tax profit from £11.2m to £9.9m in the year to the end of November on revenue up 9.4% from £570.2m to £623.9m.

Adjusted pre-tax profit surged £24m to £37.8m while underling EBIT increased 17.4% from £41.3m to £48.5m. Operating profit fell 1% from £26.8m to 26.6m.

Alex Laffey, chief executive, said he was “extremely pleased” with the significant progress made in its first year as an AIM-listed company in terms of delivering its commitments and strategy in its targeted sectors of retail, consumer, manufacturing, industrial and bulk and e-commerce.

Effective implementation of its business strategy had been key to the company’s success.

“Eddie Stobart focuses on providing cost effective innovative logistics solutions to our customers across the supply chain. In my 30 years within the retail industry, I have become acutely aware of the importance of building and developing close working relationships with customers.

“We invest in our customer relationships to ensure we deliver high levels of customer service and provide innovative solutions in a rapidly developing market.

“During the year, we have continued to grow, through new customer wins and renewals of contracts with long-term existing customers in the four key sectors in which we operate,” Laffey said.

It acquired iForce last April, an e-fulfilment specialist, providing a comprehensive e-commerce offer to a wide range of retailers.

It also gained control of Speedy Freight – a same-day business-to-business freight service, through the purchase of 50% of its shares.

“Both of these acquisitions have broadened our service offering and capabilities, enabling us to provide new services to existing customers, as well as win new customers. As a result of these acquisitions we have also benefitted from a number of cross selling opportunities,” Laffey said.

The company had recruited new people into the business to support its development within its key strategic growth sectors and “to help deliver excellent service levels to our customers”.

Eddie Stobart was also investing in “industry-leading” technology and equipment, needed to continue to provide advanced supply chain operations to our blue-chip customers, he added.

Chairman Philip Swatman said the new financial year had started well and in line with the board’s expectations.

“In terms of the wider business environment, we continue to see encouraging trends in all sectors with new and existing customers considering outsourcing, so that they can concentrate on their core operations and customer offerings. We have also seen further consolidation in the logistics sector in 2017 and early signs indicate that the trend will continue, providing further opportunities for growth.

“Whilst our existing business in continental Europe is small, we have ambitions to develop this, replicating our successful model in the UK. We will be keeping the Brexit position under review but, to date, we have seen no significant impact from Brexit on our business,” Swatman said.

Elsewhere, PureCirlce (PURE), the world’s leading producer and innovator of stevia ingredients, announced the appointment of Numis Securities as joint broker with immediate effect.

Worldpay (WPY), the payments technology company, has appointed Goldman Sachs International as its sole corporate broker in connection with its UK listing.

On the markets this morning, the FTSE 100 climbed a further 0.5% to 7,230.6pts

Early risers include Premier Foods (PFD), up 3.8% to 38.5p, Fevertree Drinks (FEVR), up 1.42% at 2,7323p, Glanbia (GLB), 1% higher at €14 and Britvic (BVIC) up 0.9% at 699,5p.

Fallers so far today include Marston’s (MARS) off 1.18% at 100.4p, Nichols (NICL), down 1.4% at 1,440p, Coca Cola HBC (CCH), off 0.5% at 2,687p and TATE & Lyle (TATE), down 0.3% at 557.6p.

Yesterday in the City

The FTSE 100 closed up 0.2% at 7,194.8pts.

After the excitement of Conviviality’s confirmation that Bestway Group had moved in on its retail business, at the opposite end of the size scale, Miso Tasty, the Japanese-style meals and snacks start-up firm, secured £150,000 in its latest round of crowdfunding.

It offered 6.86% of equity on Seedrs in exchange for £150k – valuing the business at about £2.4m. Miso Tasty was overfunded at 102% by Monday lunchtime but the business said it would continue for at least the next couple of days to see the extent of the overfunding.

FTSE 100 fallers included Hotel Chocolat Group (HOTC), down 1.4% at 362.5p, Majestic WINE (WINE), down 2.2% at 385.5p, Unilever (ULVR), off 0.9% at 3,978.5p and Greene King (GNK), down 0.9% at 470.5p.

Stocks on the up included Applegreen (APGN), up 2.72% to 528p, Associated British Foods (ABF), up 3.1% at 2,572p based on confidence in Primark even though Credit Suisse and Jefferies both cut their price target from £37 to £33.

Devro (DVO) closed up 2.9% at 205.5p, Hilton Food Group (HFG), up 1.2% at 844p and McBride (MCB) ended the day 1.5% higher at 163.2p.