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Milk, cheese and egg prices pushed up food prices in December

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Food and drink prices continued to climb higher in December, but the UK headline rate of inflation slowed for the second month in a row.

Inflation fell back to 10.5% in the 12 months to December, down from 10.7% in November, as fuel costs eased, according to the Office for National Statistics this morning.

However, spiking food costs kept the headline rate at 40-year highs, with the price of milk, cheese and eggs the biggest contributors.

Food and non-alcoholic beverages rose by 16.9% last month, climbing from 16.5% in November. It is the 17th consecutive month the ONS has logged higher prices for food and the highest level since 1977.

Sugar, jam, honey, syrups, chocolate, confectionery, mineral waters, soft drinks and juices all had an upward effect, partially offset by bread and cereals rising more slowly.

Overall, fuel prices rose by 11.5% in the year to December 2022, down from 17.2% in the year to November.

Average petrol and diesel prices stood at 155.3p and 179.1p per litre in December 2022, and were last lower in February 2022 when petrol stood at 147.6p per litre, and in April 2022 when diesel stood at 176.1p per litre.

ONS chief economist Grant Fitzner said: “Inflation eased slightly in December, although still at a very high level with overall prices rising strongly during the last year as a whole.

“Prices at the pump fell notably in December, with the cost of clothing also dropping back slightly.

“However, this was offset by increases for coach and air fares, as well as overnight hotel accommodation. Food costs continue to spike with prices also rising in shops, cafes and restaurants.”

British Retail Consortium CEO Helen Dickinson said: “With food price inflation rising and the December cold snap forcing people to spend more on their energy bills, the festive season was a challenging time for families across the UK.

“As the war in Ukraine continues, so does the pressure on energy and food prices, particularly for animal feed and fertiliser, which drove up the price of many household staples.

“However, discounting ahead of Christmas helped to ease inflation in areas such as clothing and footwear, furniture and alcoholic beverages.”

She warned that while there was some indication that inflation may have reached its peak, prices would remain high in the coming months.

Morning update

WH Smith makes ‘strong start’ to the year as travel booms

WH Smith has boosted group like-for-like sales by 26% at the start of its new financial year and declared itself in the strongest-ever position as a global travel retailer.

Revenues on the high street were flat – as expected by the retailer – but its travel division reported a 77% year-on-year jump in the 20 weeks to 14 January.

The stores in airports and railway stations were up 48% on 2019 levels and by 48% on a like-for-like basis, stripping out new openings.

It helped the group increase total sales by 41% in the period year on year.

Travel revenues in the UK increased 52% like for like, despite rail strikes as passenger numbers at airports continued to improve.

CEO Carl Cowling said ahead of an AGM later today: “The group has made a strong start to the financial year, with our global travel retail business growing strongly across all regions.

“Our strategy to transform our customer offer continues at pace through broadening our categories and expanding our ranges, to include health & beauty and tech accessories, and is underpinned by a forensic approach to retail.”

He added: “The group is in its strongest-ever position as a global travel retailer. This strength, combined with the ongoing improvement in passenger numbers across the globe, means that we are confident of another year of significant growth in 2023.”

Just Eat Takeaway improves profitability

Just Eat Takeaway has improved profitability in the second half but orders fell back in 2022.

The delivery service reported in a Q4 update that adjusted EBITDA jumped from minus €134m in the first half of last year to about €150m in the black thanks to a focus on profitability.

Total orders in the fourth quarter decreased 12% and by 10% in the UK & Ireland.

The group maintained gross transaction value at €28.2bn across 2022 as a whole thanks to higher prices, with orders down 9%.

Just Eat said it would maintain focus on profitability and expected to deliver a positive adjusted EBITDA of approximately €225m in 2023.

Eagle Eye continues momentum

Grocery tech business Eagle Eye Solutions has increased revenues 32% to £20m in the first half, while adjusted EBITDA jumped 50% to £4.7m.

The group highlighted continued strong trading momentum in the six months to 31 December as it continued to win new contracts around the world.

Trading since the period end continued to be “strong”, and the board said it was confident of delivering another year of profitable growth in line with expectations.

Eagle Eye added in the trading update: “The retail industry is becoming increasingly aware that data driven, personalised promotions are one of the most effective ways to drive increased trade and retain customer loyalty. The proven ability of the Eagle Eye AIR platform to deliver personalised promotions in real-time and at scale means it is in a strong position to address this customer need and drive further growth.”

Morning share movements

The FTSE 100 nudged up 0.1% to 7,854.73pts on news of slowing inflation.

WH Smith increased 0.8% to 1,630p on the back of its update, while Just Eat soared 11.3% to 2,370p and Eagle Eye jumped 3.2% to 542p.

Other early risers included Delivery Hero, up 5% to €52.98, McBride, up 4.8% to 26p, and Virgin Wines UK, up 4.6% to 57p.

THG lost another 4.4% in value to 51.5p (see below), Bakkavor is down 2.9% to 101p and Nichols fell 2.8% to 1,060p.

Yesterday in the City

The FTSE 100 slipped back 0.3% to 7,836.35pts.

Shares in Ocado crashed back down to earth yesterday after a good start to the new year. The stock fell 8.8% to 737p as the online grocer said in an update that inflation was weighing on profitability and the cost of living crisis dented basket sizes.

THG was also battered after issuing its fourth profits downgrade in a year, sending shares down 20.2% to 54.7p.

Fellow online stock Naked Wines fell 3.6% to 132.6p following its latest update, despite increasing its full-year earnings forecast. Rival DTC wine seller Virgin Wines UK was dragged down 9.6% to 52p by the negative sentiment.

McBride also suffered during a day of gloom for fmcg, with shares down 4.6% to 25p. The household goods own-label manufacturer showed early signs of stabilisation in its trading update after being smashed by spiralling costs for much of the past 18 months.

Drinks giant Diageo provided some cheer for investors, rising 1.9% to 3,772p on news it acquired premium rum brand Don Papa.