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Grocery price inflation saw its first small monthly dip for almost two years over the past month as higher prices continue to drive sales value growth across the sector.

New market share data from Kantar found that take-home grocery sales have increased by 5.9% year on year in the 12 weeks to 27 November 2022, the fastest level of growth since March 2021.

Grocery inflation now stands at 14.6%, but moved back by 0.1 percentage points during the most recent four weeks – its first drop in 21 months.

Fraser McKevitt, head of retail and consumer insight at Kantar, comments: “As we move into the busiest time of the year for supermarkets, there are signs that the pace of grocery price inflation is easing off slightly.

“Grocery inflation still has a long way to come down though and based on the current rate, shoppers will have to spend an extra £60 in December to buy the same items as last year. The cost of a traditional Christmas dinner for four has hit £31 in 2022, an example of just how much rising prices are impacting people at the tills and in their daily lives.”

The combination of inflation and festive spending means that the coming month is on course to be the biggest ever for take-home grocery sales, with revenues expected to top £12bn for the first time.

In terms of individual supermarkets, the strong growth of the discounters continued over the latest 12 weeks with both Aldi and Lidl opening new stores. Lidl’s year-on-year sales increased by 22%, pushing its market share to a record 7.4%, while an additional 1.5 million households shopped with Aldi compared with 2021 as it grew sales by 24.4% to claim 9.3% of the market.

Asda’s sales grew ahead of the sector, up by 6.1%, keeping its share steady at 14.0%. Tesco’s market share is at 27.2% as its sales rose by 3.9%. The second largest retailer, Sainsbury’s, pushed up sales by 4.3% this period.

Morrisons and Waitrose were the only physical retailers in decline, with sales down 4.7% and 1.8% respectively.

Ocado also saw sales drop back 0.2%, with sales declines concentrated in its traditional south east and London heartland.

Elsewhere, convenience retailer Co-op increased sales by 3.5% and achieved 6.0% market share, while Iceland’s sales grew by 6.1%, as its share remained at 2.3%.

The number of times people visited physical supermarkets hit a new high this period. Households went grocery shopping more than 48 times in the 12 weeks to 27 November, that’s the highest frequency we’ve recorded since April 2020

Fraser McKevitt adds: “This is largely about the gradual return to pre-COVID behaviours – something we’ve been following for many months.”

Looking ahead to the festive period, Kantar said consumers are leaving their seasonal purchases later this year as they try to manage budgets in the run up to Christmas Day.

“We’re seeing yet more evidence of the coping strategies shoppers are adopting to mitigate rising costs, and in particular own label sales are growing at pace, now up 11.7% year on year. The cheapest value own label lines have soared by 46.3%, but people still want to find room for treats at this time of year and this is driving growth at the other end of the spectrum too. Premium own label sales are up by 6.1% to £461m in November.”

Morning update

Travel food retail specialist SSP Group bounced back strongly last year from Covid lows, to return to profit on sales rebounding by more than 160%.

Although Covid-19 continued to have a “significant” impact on the group’s trading performance during the 52 weeks to 30 September, revenue in major markets continued to recover well with total sales of £2.2bn.

That 162% increase year-on-year represented around 78% of the 2019 pre-Covid levels, up from just 30% in the period period.

Trading was affected by the spread of the Omicron variant around the world and the subsequent government restrictions imposed during December and January, which had an impact on passenger numbers and saw sales in the period drop back to 57% of 2019 levels.

However, during the second half year, group revenue continued to strengthen, averaging 87% of 2019 levels in the third quarter and 92% across the fourth quarter, with the half as a whole averaging 90% of 2019 levels.

This progressive improvement was driven by a continued strong recovery in passenger numbers in the majority of our markets, led by domestic and leisure travel across both the Air and Rail sectors, with business and commuter travel also recovering, albeit more slowly.

Since our year-end the group has seen trading continue to strengthen, with first quarter revenue during the first eight weeks averaging 104% of 2019 levels, and 97% of 2020.

Underlying operating profit for the year was £31.7m, compared to an equivalent loss of £323.3m in 2021.

On a reported basis, the operating profit for the year was £91.5m, reflecting a net credit of £59.8m for the non-underlying operating items, up from an equivalent operating loss for the prior year of £309.2m.

SSP said the impact on the underlying operating profit from the lower sales compared to 2019 continued to be mitigated by the extent of operating cost reductions, other government support measures, and our ongoing success in negotiating rent concessions, principally via waivers of minimum guaranteed rents.

During the second half year, as sales recovered to 90% of pre-pandemic levels, the group saw a significant improvement in underlying operating profit performance, its ongoing management of inflationary cost pressures through productivity and pricing initiatives.

Looking forwards, whilst it said there remains considerable uncertainty in the macroeconomic environment, the group is confident that “our flexible and resilient business model will enable us to continue to offset cost inflation, manage supply chain and labour volatility, and optimise profitability and returns as our travel markets continue to recover”.

Medium-term expectations for the recovery remain unchanged, with it guiding to a return to broadly pre-Covid levels of like-for-like profitability, augmented by the roll out of our secured new business pipeline.

CEO Patrick Coveney commented: “This has been a year of strong recovery for SSP, with momentum building strongly through the second half and into our new financial year. Group revenues are now tracking at 104% of 2019 levels, and as revenues have recovered we have delivered good profits and robust cash flows.

“SSP is a fabulous business with strong foundations on which to build. The global air and rail travel sectors are set up for long-term structural growth, consumer demand for quality food offerings in travel locations remains strong, and we have significant head room for growth in multiple markets across the world.

“In particular, we see significant potential for further expansion in North America - a $6bn market in which we currently only have a 10% market share. North America is central to our growth plans, and we envisage it becoming a much bigger part of the Group over the next few years. We are also rapidly building our presence in selected Asia-Pacific markets and continue to expand in a targeted way in the UK, Europe and the Middle East.

“The quality of our people, the resilience of our business model, the support of our client, brand and supply partners, and the structural growth in travel demand mean that, despite the current macroeconomic uncertainty, we remain confident in the future growth and returns prospects for SSP.”

SSP Group shares are up 2.6% to 222p this morning.

Elsewhere, this morning, UK retail sales are on the rise as pre-Christmas purchases and the Black Friday sales event boosted consumer shopping activity.

According to the BRC KMP Retail Sales Monitor, industry sales increased by 4.2% in November on a total basis, against an increase of 5.0% in November 2021 – well above both the 3-month average and 12-month average growths of 2.6%.

UK retail sales increased 4.1% on a Like-for-like basis from November 2021, when they had increased by 1.8%.

Over the three months to November, food sales increased 5.8% on a total basis and 5.5% on a like-for-like basis – comfortably above the 12-month total average growth of 2.2%.

Non-Food retail sales were flat over the same three month period on a total basis and decreased 0.4% on a like-for-like basis, which is below the annual average of 3%.

In-Store sales of non-food items increased 2.2% on a total basis over the three month period, with online sales down by 0.4% in November.

BRC CEO Helen Dickinson commented: “Sales picked up as Black Friday discounting marked the beginning of the festive shopping season. However, sales growth remained far below current inflation, suggesting volumes continued to be down on last year. As the weather began to turn, customers were quick to purchase winter warmers, such as coats, hot water bottles, and hooded blankets. Black Friday discounts also boosted sales of home furnishings as many households traded big nights out for budget nights in.

“Despite facing huge cost pressures, retailers are doing all they can to keep prices affordable for all their customers. But, the cost of living crisis means many families might dial back their festive plans. Yet, with three weeks to go, there is still plenty of time for the Christmas cheer to bring sales home this Christmas.”

KPMG’s UK head of retail, Paul Martin, added: “Black Friday bargains saw retail sales grow by over 4% in November and was a much-needed boost both on the high street and online.

“Household appliances, footwear and furniture saw positive sales growth both in store and online as consumers sought out good deals on designer items and started to prepare for Christmas gatherings at home. However, some categories such as toys, computing and baby equipment have now seen several months of negative sales figures that even the festive boost has not been able to reverse.

“As we enter the last crucial few weeks of the year, retailers will be hoping that consumers continue to focus on the Christmas feel good factor. For some struggling retailers hit hard as consumer confidence and spending declines, and costs continue to rise, the next few weeks could be critical to their survival. Retailers are well aware that in the current environment it is a battle to attract and retain every customer. Given the economic headwinds for the year ahead, with consumer behaviour expected to evolve further as shoppers look to trade down and purchase less, understanding and meeting customer needs will be mission critical for retailers, and it’s a job that keeps getting harder.”

IGD CEO Susan Barratt, commenting on food and drink, added: “With inflation still driving accelerating top-line growth, the UK market continued to see real terms decline in November. However, that decline has slowed versus October with shoppers shifting into recognisable ‘seasonal’ mode as November wore on, while some additional demand also emerged as the World Cup got underway at the end of the month.

“Shopper trust in the industry to maintain good availability of food and groceries dropped to its lowest ever level in November. Well-publicised availability challenges in eggs and poultry may have influenced this decline. Indeed, importance of animal welfare when choosing what to buy dropped to its lowest level since our record began in 2017, as shoppers were forced to choose to go without or buy a product with lower welfare standards.”

Consumer card spending grew 3.9% year-on-year in November, according to Barclaycard, with spending slightly higher than in October (3.5%), but well below the 9.6% rise in consumer price inflation as consumers to tighten purse strings amid rising living costs and higher energy bills.

Spending on essential items grew 7.1% – an increase on last month’s growth of 5.7%. This was mostly driven by the largest uplift in supermarket shopping (6.5%) since February 2021, as well as the highest rise in spending at food & drink specialist stores (1.1%) since December 2021.

These increases were likely caused by surging food prices, as well as the quarter of people (26%) who say they have been stocking up on Christmas items earlier this year to help spread the cost.

Supply chain issues are also influencing grocery shopping habits, as two fifths (40%) of consumers report being concerned about products running out of stock earlier than usual. Some 69% of these shoppers say they’re worried about shortages of household essentials such as eggs, likely due to the recent avian flu outbreak, while 48% expect to find it difficult to source Christmas meat such as turkey and ham.

Spending on non-essential items grew 2.3% in November, though this was slightly less than last month (2.5%) and significantly lower than in November 2021 (22.9%), as the rising cost of living led consumers to make more considered choices about their discretionary purchases.

Clothing and department stores slipped further into decline in, falling -3.0% and

-1.5% respectively, compared to -0.5% and -1.0% in October.

Bars, pubs & clubs, however, saw higher year-on-year growth (4.1%) than in October (1.7%) – perhaps due to gatherings to watch major sporting events.

Brits’ confidence in their household finances and ability to live within their means each month has seen a small dip, falling from 60% and 67% in October to 57% and 64% respectively in November. However, optimism in the UK economy has risen marginally over the same period – perhaps in response to the Autumn Statement – from 15% to 18%.

Esme Harwood, Director at Barclaycard, said: “As inflation and energy bills rise, Brits feel increasingly concerned about their already- squeezed personal finances. Cut-backs are affecting non-essential spending on clothing, department stores and restaurants. Many Brits intend to reduce festive spending on presents and parties in an effort to save money.

“Bars, pubs & clubs are bucking the trend – they enjoyed a strong early November thanks to the rugby, cricket and Formula 1. There’s a good chance this growth will continue as football fans gather to watch the later stages of the World Cup.”

On the markets this morning, the FTSE 100 has edged back 0.1% to 7,561.3pts.

Risers include McBride, up 6.8% to 21.9p, Marston’s, up 1.8% to 39.4p and Cranswick, up 1.8% to 3,194p.

Fallers include Deliveroo, down 2.4% to 89.9p, Kerry Group, down 2.1% to €89.08 and Glanbia, down 1.6% to €11.37.

Yesterday in the City

The FTSE 100 started the week rising 0.2% to 7,567.5pts.

Risers included AG Barr, up 6.5% to 538p after its purchase of Boost energy drinks for a deal worth up to £32m.

Other risers included Kerry Group, up 2.3% to 91p, Pets at Home, up 2.1% to 277.4p, Devro, up 1.6% to 309p, Haleon, up 1.2% to 295p, Compass Group, up 1.1% to 1,896p and Greencore, up 0.8% to 65.5p.

Fallers included FeverTree, down 4% to 1,143p, Virgin Wines, down 2.8% to 69.5p, McBride, down 2.4% to 20.5p, Just Eat, down 2.4% to 1,905.2p, Deliveroo, down 2.3% to 92.2p and Naked Wines, down 2.1% to 95p.