A flurry of festive trading statements reveals the retail charts for the supermarkets. Following the autumnal trends, Aldi, Lidl and Waitrose took the Champion’s League positions while Morrisons was relegated to the old Vauxhall Conference.
In the middle of the pack, Tesco emerged with stronger underlying momentum than Sainsbury’s, signalling progress from Philip Clarke’s team - progress that enabled him to announce Chris Bush as the new MD of UK operations.
However, the broad mood at the start of 2013 is cautious. While the UK economy crawled out of recession, it has not managed to make much distance from the cliff edge and may slip back if the first quarter sustains the momentum of Q4 2012.
Whether in or out of recession, economic activity in 2013 is expected to be subdued with the hope of a more meaningful pickup in 2014. As such, the British grocery industry is in the midst of a slog, so better performance is not anticipated until wages and salaries grow and inflation moderates.
“The case to slow store openings has been robust for some time”
Consumer confidence needs to improve if retail is to come out of the doldrums. We hope, rather than anything more scientific, that the mood lightens, noting the absence of a Diamond Jubilee or Olympics to perk us up, but we do not see foresee any clear catalyst for a material improvement.
Considerable austerity measures are yet to be implemented and inflation remains robust food prices could be particularly active and important this year if northern hemisphere harvest yields are pressurised.
While the demand side of the retailers’ P&L models is constrained, the cost and supply-side doesn’t fill us with comfort and joy either. The trade has to cope with a step up in business rates in the spring while an industry that is probably entering a third year of food volume declines - unprecedented territory - continues to add space way ahead of market values including ongoing capacity growth from the online channel.
The case to slow down store openings has been robust for some time but not enough has happened. Could 2013 be a threshold on the space front? It should be.