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Grocery sales are expected to surpass £13bn for the first time this Christmas despite supermarket sales growth continuing to lag slowing inflation.
The latest Kantar market share figures show that sales grew by 6.3% over the four weeks to 26 November 2023 to reach £11.7bn as inflation dropped again in November to 9.1%.
Fraser McKevitt, head of retail and consumer insight at Kantar, said: “The scene is set for record-breaking spend through the supermarket tills this Christmas. Some of the increase, of course, will also be driven by the ongoing price inflation we’ve seen this year.
“While the rate at which grocery prices are rising is still well above the norm, the good news for shoppers is that inflation is continuing to come down. The retailers are also battling it out to offer value to consumers during this important month for trading and are doing what they can to keep prices low.
“In a sign of just how fierce the contest is between the grocers, the cost of a Christmas dinner for four has risen well below the overall inflation rate this year at 1.3%, as some items on our festive plate have actually fallen in price.”
Kantar said that retailers are putting the emphasis on own-label lines and promotions to attract people through their doors. Kantar data shows that spending on offers hit its highest level in over two years in the latest four-week period at 28.4%.
Brands have benefited from the boost in offers and have now edged ahead of their own-label counterparts, growing sales by 6.5% versus 6.4% for retailer lines. However, own label is still doing incredibly well and premium lines especially so, with these products up by 15.4% year on year, with wine, chilled ready meals and fresh beef among the big winners last month.
On an individual retailer basis, Lidl is again the fastest-growing grocer, boosting sales by 14.2% over the 12 weeks to 26 November, while Aldi increased sales by 11.1%.
Meanwhile, the two biggest supermarkets continued their fightback in the battle for market share last month.
McKevitt said that Sainsbury’s delivered its largest market share gain in over a decade this November, taking an additional 0.4 percentage points to reach 15.6% as sales grew by 10.2%.
Tesco also put in a strong performance to increase its market share to 27.5% following a growth in sales of 8.6%.
Sales at Asda and Morrisons were up by 2.6% and 3.7% respectively. Co-op, Waitrose and Iceland were up by 4.5%, 4.6% and 3% respectively, while Ocado’s sales jumped by 12.1%, holding its market share steady at 1.7%.
Grocery inflation now stands at 9.6% for the 12-week period ending 26 November 2023. Prices are rising fastest in markets such as eggs, sugar confectionery and frozen potato products.
Morning update
Travel retail specialist SSP Group continued to recover strongly from the impact of Covid last year, with sales of over £3bn.
At actual foreign exchange rates, total group revenue of £3bn was 7.7% ahead of 2019 levels (9.6% on a constant currency basis) and increased by 37.7% compared with 2022 (37.9% on a constant currency basis).
The group said this revenue performance included the benefit from net contract gains as it accelerated the mobilisation of its significant pipeline, in addition to price increases compared with the same period in each year.
During the first half year, revenues were 4.5% ahead of 2019 levels at actual exchange rates and 3.8% ahead on a constant currency basis.
This performance was driven by a strong recovery in passenger numbers, initially led by strong leisure travel demand throughout the autumn, following an extended holiday season in several markets.
This momentum continued throughout the winter and early spring, despite significant industrial action impacting the UK rail network, with trading across the group demonstrating a resilience to broader pressures on consumer spending.
Compared with the first half of 2022, sales increased by 64.1%.
During the second half year, trading continued to strengthen, increasing by 10.3% at actual exchange rates compared to 2019 (14.5% on a constant currency basis). Against 2022, where the prior year comparatives were considerably more challenging than in the first half, second half revenues increased by 22.4% (25.4% on a constant currency basis).
This further improvement in underlying trading was driven by a continued recovery in passenger numbers over the summer, particularly in the air sector, as well as the group’s stronger customer proposition and further deployment of digital order and payment technology.
For the year as a whole, like-for-like sales growth versus 2022 was 31.5%, with the growth in the air channel “particularly encouraging” due to strong recoveries in passenger numbers in most of its major markets.
SSP Group also said that trading has continued to strengthen in all of its major markets since year end, with total first quarter revenue during the first eight weeks increasing by 22% compared with 2023 on a constant currency basis.
Looking forward to 2024, the group is planning for like-for-like sales growth of 6% to 10%, driven principally by a further recovery in passenger numbers and additional year on year price increases, and net contract gains in the region of 5%.
This would equate to total sales in the region of £3.4bn-3.5bn on a constant currency basis.
Group underlying operating profit was up to £204.8m, compared with £31.7m in the prior year.
On a reported basis under IFRS 16, the operating profit was £166.8m (up from £91.5m), reflecting a charge of £38m for the non-underlying operating items.
In 2024 the group expects to deliver further improvements in EBITDA and operating profit, anticipating EBITDA to be within the range £345m-375m and operating profit to be within the range £210m-235m.
Patrick Coveney, CEO of SSP Group, said: “This has been a year of strong financial, operational and strategic progress for SSP. We are continuing to lay the foundations for accelerated expansion in key growth markets such as North America and Asia Pacific.
“We are also making clear strides in enhancing our customer proposition, our digital capabilities and our sustainability initiatives. Our ongoing focus on these areas has led to SSP delivering strong like-for-like growth, high levels of new business, a robust margin recovery, and even closer relationships with our clients and brand partners. We are very pleased to be taking the important step today of proposing to reinstate the ordinary dividend.
“SSP is in very good shape, and we are excited by the opportunities in front of us. We are building strong momentum across all areas of the business thanks to the efforts of our outstanding colleagues across the world, as well as the ongoing support of our clients and brand partners. The commitment of our people, the structural growth in travel demand and the strength of our business model mean we are well placed to deliver compounding growth and returns in the years to come.”
THG has announced it has agreed to acquire prestige skincare brand Biossance for a maximum consideration of $20m.
Since inception in 2015, Biossance has generated global revenues of c. $300m and is currently stocked in over 1,600 stores globally including Sephora, Harrods, Space NK, Douglas and Selfridges plus online through biossance.com, Lookfantastic and Cult Beauty.
The brand’s curated skincare range of cleansers, creams and serums is centred on its innovative ingredient technology and a commitment to sustainability, with price points ranging from $15 to $74.
THG is acquiring Biossance from US biotechnology group Amyris Inc, which recently commenced voluntary Chapter 11 bankruptcy proceedings in the US.
An auction was held on 30 November 2023 with THG declared as the successful bidder for assets including IP, plus inventory and debtors with a book value of $29m.
Closing is expected to follow in mid-December, with integration completing in Q1 2024.
THG CEO Matthew Moulding said: “We are delighted to acquire the pre-eminent skincare brand Biossance. The technology-led, clean chemistry formulations resonate with consumers globally, evidenced by a strong performance on our own retail sites.
“We have significant experience in prestige skincare as an innovator and manufacturer, and through our own brand portfolio including Perricone MD and ESPA. We’re incredibly fortunate and excited to secure this opportunity to work with the Biossance team and further build on the brand’s strong awareness across the US.
“The fit within THG is perfect, with Biossance already generating c. $2m in revenue across our retail sites in the past 12 months. Integration on to the Ingenuity platform will commence as soon as the deal is finalised.”
Elsewhere, total UK retail sales increased by 2.7% in November, against a growth of 4.2% in November 2022, according to the latest BRC-KMPG Retail Sales Monitor.
This growth was above the three-month average growth of 2.6%, but well below the 12-month average growth of 4.1%.
Food sales in the period increased 7.6% on a total basis over the three months to November. This is below the 12-month average growth of 8.4%. For the month of November, Food was in growth year on year.
Non-food sales decreased 1.6% over the three-months to November, which was below the 12-month average growth of 0.5% after a decline year on year during the month.
Over the three months to November, in-store non-food sales decreased 0.8% since November 2022, while online non-food sales decreased by 2.1% in November.
The proportion of non-food items bought online decreased to 41.4% in November from 41.6% in November 2022.
BRC CEO Helen Dickinson said: “Black Friday began earlier this year as many retailers tried to give sales a much-needed boost in November. While this had the desired effect initially, the momentum failed to hold throughout the month, as many households held back on Christmas spending. health and beauty products showed stronger growth, but non-food sales were down overall year on year.
“November had the highest proportion of non-food goods purchased online for 2023, though this remains below the previous year’s level.
“Retailers are banking on a last-minute flurry of festive frivolity in December and will continue working hard to deliver an affordable Christmas for customers so everyone can enjoy some Christmas cheer. Looking ahead to 2024, retailers will have to shoulder many new cost pressures, including a rise to business rates, as well as costs from other new regulations. These, combined with the biggest rise on record to the national living wage, will mean retailers will have less capital to invest in lowering prices for their customers.”
Paul Martin, UK Head of Retail, KPMG, said: “With the clock ticking down to Christmas, sales growth in November remained weak at 2.7%, despite a big push from retailers around Black Friday deals.
“With less than a month to go and sales growth limping along, the cost of living crisis has taken its toll on Christmas spending for many households, and the continued economic conditions are testing consumer resilience. Price remains the main purchasing driver, so we are likely to see a prolonged and well targeted period of discounting as retailers compete hard for a shrinking pool of spend and will need to clear stock.
“With two of the three months of the crucial golden quarter seeing sales growth below 3%, it has already been a weak Christmas trading period. Any excess stock not sold before Christmas could be further reduced leading to big January sales, and potentially having an even greater impact on already tight margins. As we look to the first few months of 2024, we can expect the challenges to continue which could lead to further casualties in the sector, particularly pure online players facing more than 28 months of consecutive sales decline.”
IGD CEO Sarah Bradbury said of the food sector: “For a second month in a row, food and drink sales were down in November compared to October. Footfall for the month was down compared to November ’22, a likely result of storms Ciarán and Debi bringing wetter and more windy weather across the country.
“IGD’s Shopper Confidence Index enjoyed a slight rise in November, driven primarily by a rise in confidence among the lowest income earners. This group were likely boosted by plans for the national minimum wage to rise announced by the government in the autumn statement.”
Finally this morning, consumer card spending grew 2.9% year on year in November – less than the latest CPIH inflation rate of 4.7% but higher than October’s 2.6% growth – according to Barclaycard.
The high street received a welcome boost from month-long Black Friday sales, as well as the late arrival of cold and wet weather, which encouraged shoppers to update their winter wardrobes.
Spending on essential items saw a smaller increase (3.3%) than in October (3.9%), as falling petrol and diesel prices impacted fuel spend (–10.9%). Growth at supermarkets was also lower month on month (5.0% vs 5.2%) following the easing of food price inflation and the majority of shoppers (67%) seeking ways to reduce their grocery food bills.
Of these cost-conscious shoppers, half (50%) are using vouchers or loyalty points to get money off their shopping, and 49% are choosing budget or own-brand goods over branded items.
Encouragingly, while the proportions of consumers concerned about inflation and food prices remain high (each at 86%), both fell to their lowest levels since December 2021. Similar improvements were also recorded on attitudes towards fuel prices, household bills and interest rates.
Shoppers expect to fork out an average of £105.43 more on Christmas this year than in 2022. Festive food and drink is expected to be the largest contributor to this increase, rising by an average of £25.87, followed by gifts (+£18.62) and activities (+£11.86).
Esme Harwood, director at Barclays, said: “Shoppers got into the festive spirit early this year, flocking to the high street to take advantage of month-long Black Friday sales, and unlocking long-awaited retail growth. Consumers were also keen to socialise, but prioritised more economical – and warmer – ways to catch up with friends and family, choosing cosy nights in with takeaways or enjoying drinks at the pub instead of dining out at restaurants.
“November also marked a turning point for consumer sentiment – confidence in personal finances improved, with Brits starting to feel less concerned about some of 2023’s defining issues, such as inflation, interest rates, and food prices – so there are reasons to be cautiously optimistic as we look ahead to Christmas and the new year.”
Jack Meaning, chief UK economist at Barclays, said: “This data suggests consumers are continuing to spend more but get less for their money, as spending growth remains below inflation. However, the gap is narrowing as the rate of price increases slows, and we expect it to narrow further in the coming months.
“It’s reassuring to see that some of the previous weakness in spending was due to unseasonal weather, as shoppers go out and finally buy that new winter coat and get in the Christmas spirit. But the key question for the UK is what happens after the holiday period – it will take more than a festive bounce to keep consumers spending in 2024.”
On the markets this morning, the FTSE 100 is down 0.5% to 7,479.4pts this morning.
Risers include SSP Group, up 4% to 221.6p, McBride, up 1.6% to 72.9p and AG Barr, up 1.4% to 489.5p.
Fallers include Cranswick, down 2.3% to 3,798p, Just Eat Takeaway, down 1.8% to 1,208p and Naked Wines, down 1.7% to 33.4p.
Yesterday in the City
The FTSE 100 opened the week, falling back 0.2% to 7,513pts yesterday.
The day’s fallers included McBride, down 4.3% to 71.8p, Deliveroo, down 2.3% to 137.9p, PayPoint, down 1.6% to 456.5p, Greggs, down 1.2% to 2.442p and Naked Wines, down 1.2% to 34p.
Risers included Glanbia, up 4.1% to €15.30, Fever-Tree, up 3% to 1,048p, Coca-Cola Europacific Partners, up 2.7% to €56.50, B&M European Value Retail, up 1.6% to 598.2p, WH Smith, up 1.3% to 1,300p and PZ Cussons, up 1.2% to 149p.
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