The flurry of Christmas trading statements this week reveals that grocery outperformed the retail sector. Non-food proved a key factor, as
Sean McAllister reports
Christmas brought glad tidings for those with a strong non-food offering in the grocery sector and for the City’s new favourite Morrisons - but not for Sainsbury and some high street retailers which must now be wondering what they can pull out of the hat to rescue their end-of-year results.
Grocers strong on non-food must be optimistic. In the lead-up to the festive season, The Grocer’s Christmas shopping survey (‘Tesco tills will be a’ jingling”, The Grocer, Dec 6, p32) predicted a good performance from Tesco and Asda, due in part to the strength of their non-food offerings that made their stores one-stop Christmas destination shops.
Tesco did not disappoint. Like-for-like sales were up 7.5% for the seven weeks to January 3, exceeding many analysts’ already rosy expectations.
Numis Securities analyst Iain McDonald says: “Once again, the key driver appears to have been very strong non-food sales.” Tesco reported sales of home entertainment products growing by 29.4%.
In contrast, entertainment sales at WH Smith in the four months to Christmas were down 3% in what appeared to be another example of the supermarkets stealing trade from the high street.
The multiples have made no secret of their desire to take on leading high street retailers. Last week Tesco announced a reduction in the price of its health & beauty and baby products, presenting a challenge
to Boots. Asda has been doing it for years with its George clothing lines. And the likes of Dixons and H Samuel could be next in the firing line after Asda boasted it sold 10 times more digital cameras over Christmas 2003 compared with 2002 and 750,000 pieces of fine and costume jewellery in the two weeks before Christmas Day.
The biggest yuletide winner, however, was not one of the non-food disciples - though it does boast a small non-food offer - but Morrisons. Despite having to deal with the takeover of Safeway, it was the star performer with like-for-like sales up 10.2% for the six weeks to January 4. The City was impressed, with analysts using words such as “magnificent”, “superb” and “excellent” to describe the performance.
Joint MD Bob Stott says the results were down to good availability and a strong offer across all the stores. The stores have also benefited from the “curiosity value” generated by the media interest surrounding the Safeway takeover, which had brought new customers into the stores, he says. “We demonstrated the depth and quality of our management by delivering a good trading performance despite the Safeway distraction.”
But even Morrisons figures were boosted by sales of non-food, despite the fact it only represents 6% to 7% of its business. Indeed, its best performing department was home and leisure, which achieved a like-for-like sales uplift of 15.8% - mainly because of Morrisons’ music and video offering.
Stott confirms that it now plans to develop its non-food offering although it will not venture into clothing and big ticket lines.
Elsewhere, Iceland put in a respectable performance over Christmas. Like-for-like sales were up 1.9% for the five weeks to January 2. Many analysts were impressed that Iceland’s growth was beginning to accelerate. Like-for-like sales for the 13 weeks to January 2 were just 1.2%. However Baird’s Paul Smiddy is not as convinced. “If the Iceland story is going so well, why is [MD
Mike] Coupe going, and why was [retail director Ted] Smith fired?”
The picture was not so clear at Safeway, which did not publish its Christmas trading performance. Not even Morrisons were allowed to see the figures but Morrisons’ Stott said he believed Safeway had “done OK” with a “reasonable level of trade”.
Others probably wish they too had withheld their figures. At Marks and Spencer, like-for-like sales of food were up just 0.5% for the seven weeks to January 10, a performance described by chief executive Roger Holmes as adequate.
On the face of it Sainsbury didn’t do too badly, with like-for-like sales up 2% for the four weeks to January 3 - much better than the 0.1% rise in like-for-like sales for the 12 weeks to January 3. Group chief executive Sir Peter Davis pronounced that it was an encouraging performance and that the new clothing and health & beauty ranges had “performed well” over Christmas, while customers had reacted well to the new general merchandise offer. But although the attempt to bolster its sales by suspending its business transformation programme during December to concentrate on its Christmas trading appeared to have had an impact, the results were seen by many in the City as unsatisfactory, which was reflected in a 3.5% drop in the share price.
“It’s the same old story,” says one analyst. “Sainsbury has again been disappointing. Its non-food offering came too late, while halting the restructuring process has not helped. In fact it just highlights the issues it faces.”
Analysts are undecided on the likely outcome for Sainsbury. Seymour Pierce analyst Richard Ratner says opinion is divided between the bulls, who believe Justin King will turn it round, and more sceptical commentators, “such as ourselves, who think that Asda, Tesco and Morrison/ Safeway will continue to take market share”.
As for the others, the paradox is that the better they do, the better they have to do. A good few must already be pondering how they can improve on 2003 festive trading figures this Christmas.
Sean McAllister reports
Christmas brought glad tidings for those with a strong non-food offering in the grocery sector and for the City’s new favourite Morrisons - but not for Sainsbury and some high street retailers which must now be wondering what they can pull out of the hat to rescue their end-of-year results.
Grocers strong on non-food must be optimistic. In the lead-up to the festive season, The Grocer’s Christmas shopping survey (‘Tesco tills will be a’ jingling”, The Grocer, Dec 6, p32) predicted a good performance from Tesco and Asda, due in part to the strength of their non-food offerings that made their stores one-stop Christmas destination shops.
Tesco did not disappoint. Like-for-like sales were up 7.5% for the seven weeks to January 3, exceeding many analysts’ already rosy expectations.
Numis Securities analyst Iain McDonald says: “Once again, the key driver appears to have been very strong non-food sales.” Tesco reported sales of home entertainment products growing by 29.4%.
In contrast, entertainment sales at WH Smith in the four months to Christmas were down 3% in what appeared to be another example of the supermarkets stealing trade from the high street.
The multiples have made no secret of their desire to take on leading high street retailers. Last week Tesco announced a reduction in the price of its health & beauty and baby products, presenting a challenge
to Boots. Asda has been doing it for years with its George clothing lines. And the likes of Dixons and H Samuel could be next in the firing line after Asda boasted it sold 10 times more digital cameras over Christmas 2003 compared with 2002 and 750,000 pieces of fine and costume jewellery in the two weeks before Christmas Day.
The biggest yuletide winner, however, was not one of the non-food disciples - though it does boast a small non-food offer - but Morrisons. Despite having to deal with the takeover of Safeway, it was the star performer with like-for-like sales up 10.2% for the six weeks to January 4. The City was impressed, with analysts using words such as “magnificent”, “superb” and “excellent” to describe the performance.
Joint MD Bob Stott says the results were down to good availability and a strong offer across all the stores. The stores have also benefited from the “curiosity value” generated by the media interest surrounding the Safeway takeover, which had brought new customers into the stores, he says. “We demonstrated the depth and quality of our management by delivering a good trading performance despite the Safeway distraction.”
But even Morrisons figures were boosted by sales of non-food, despite the fact it only represents 6% to 7% of its business. Indeed, its best performing department was home and leisure, which achieved a like-for-like sales uplift of 15.8% - mainly because of Morrisons’ music and video offering.
Stott confirms that it now plans to develop its non-food offering although it will not venture into clothing and big ticket lines.
Elsewhere, Iceland put in a respectable performance over Christmas. Like-for-like sales were up 1.9% for the five weeks to January 2. Many analysts were impressed that Iceland’s growth was beginning to accelerate. Like-for-like sales for the 13 weeks to January 2 were just 1.2%. However Baird’s Paul Smiddy is not as convinced. “If the Iceland story is going so well, why is [MD
Mike] Coupe going, and why was [retail director Ted] Smith fired?”
The picture was not so clear at Safeway, which did not publish its Christmas trading performance. Not even Morrisons were allowed to see the figures but Morrisons’ Stott said he believed Safeway had “done OK” with a “reasonable level of trade”.
Others probably wish they too had withheld their figures. At Marks and Spencer, like-for-like sales of food were up just 0.5% for the seven weeks to January 10, a performance described by chief executive Roger Holmes as adequate.
On the face of it Sainsbury didn’t do too badly, with like-for-like sales up 2% for the four weeks to January 3 - much better than the 0.1% rise in like-for-like sales for the 12 weeks to January 3. Group chief executive Sir Peter Davis pronounced that it was an encouraging performance and that the new clothing and health & beauty ranges had “performed well” over Christmas, while customers had reacted well to the new general merchandise offer. But although the attempt to bolster its sales by suspending its business transformation programme during December to concentrate on its Christmas trading appeared to have had an impact, the results were seen by many in the City as unsatisfactory, which was reflected in a 3.5% drop in the share price.
“It’s the same old story,” says one analyst. “Sainsbury has again been disappointing. Its non-food offering came too late, while halting the restructuring process has not helped. In fact it just highlights the issues it faces.”
Analysts are undecided on the likely outcome for Sainsbury. Seymour Pierce analyst Richard Ratner says opinion is divided between the bulls, who believe Justin King will turn it round, and more sceptical commentators, “such as ourselves, who think that Asda, Tesco and Morrison/ Safeway will continue to take market share”.
As for the others, the paradox is that the better they do, the better they have to do. A good few must already be pondering how they can improve on 2003 festive trading figures this Christmas.
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