Aldi Christmas dinner – the discounter’s continued to grow market share

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Sales at the UK supermarkets reached a record high of £4.8bn during the week leading to Christmas, with volumes also increasing as shoppers traded up for festive indulgences.

The week ending 23 December saw a 4.3% rise in annual grocery sales, according to new data from NIQ, with volumes also up by 1.2%.

NIQ data showed that UK shoppers took advantage this year of a full week of trading with the opportunity for extra supermarket visits up to Christmas Eve.

Over the four weeks to 30 December and across all channels, shoppers spent £657m more on groceries compared with the same period last year.

NIQ said shoppers focused on essentials and topped up with affordable treats – economising on discretionary spend such as general merchandise to afford to trade up in food and drink.

However, sales uplifts for beers, wines and spirits were disappointing and it was one area where shoppers bought less. This included champagne (value sales –5.8%), port (-4.3%), sparkling wine (–2.7%) and spirits (–2.0%).

Promotions increased to 26.5% of fmcg sales – a four-year high which is unusual during December and is due to price competition remaining intense, with price cuts and extended loyalty scheme discounts on seasonal items.

According to NIQ, over the four-week period ending 30 December 2023, online sales (+7.7%) were just ahead of bricks and mortar stores (+5.5%), with 27% of households shopping online in the period.

NIQ’s data shows that the discounters continued to be the fastest growing channel overall, and both Aldi and Lidl continued to outperform the market, with combined market share increasing in the 12-week period to 20.1%, growing by 11.4% and 15.3% respectively.

However, while sales at the discounters continued to grow, some UK shoppers sought to ‘trade up’ for Christmas. Marks & Spencer was the winner among the major supermarkets, with sales up 12.1% in the 12-week period.

Additionally, Sainsbury’s (+8.7%) and Tesco (+7.4%) experienced strong trading, with the former increasing market share over the full 12 weeks to 14.3%.

Asda and Morrisons were up by 3.2%, Waitrose by 3.6% and the Co-op by 2.8%.

Mike Watkins, NIQ’s UK head of retailer & business insight, commented: “With a full week of shopping before Christmas Day and then the benefit of another week to spend in the build-up to New Year’s Eve, it was an omnichannel Christmas. Shoppers mixed and matched across the month to take advantage of the convenience of an early online delivery or click & collect and then store visits for last-minute shopping for fresh and festive food for family, friends and the new year celebrations.

“However, with shoppers spending around 18% more on their groceries than two years ago, many were mindful of overspending, economised early in the quarter and overall bought less volume in eight out of the 12 weeks.”

Watkins concludes: “Looking ahead, it’s likely that the cautious shopper sentiment seen in 2023 will continue for the first part of 2024 but from late spring onwards we can anticipate confidence slowly improving. The NIQ outlook for 2024 is that Total Till growths will be around 5% but this depends on where food inflation lands during the year. Even so we can expect to see fmcg volumes turning positive as the year progresses.”

Morning update

B&M Bargains owner B&M European Value Retail had a “pleasing” quarter in the run-up to Christmas, with modest B&M like-for-like growth underpinning group revenue growth of 5%.

For the 13-week period to 23 December 2023 group revenues were up 5% year on year to £1.65bn.

Including the Q3 figures, the group’s year-to-date growth is is 8.1% to £4.2bn on a constant currency basis.

In the 14-week period to 30 December 2023, B&M UK like-for-like revenue growth was 1.2%, a strong quarter given prior year comparatives, performance was driven by positive transaction numbers

The discounter saw “excellent” general merchandise volume performance, delivering strong sales participation and high sell-through.

B&M UK overall sales were up 3.7% in the period to £1.35bn, while B&M France was up 11.3% to £151m and Heron Foods up 11.7% to £144m.

The group remains on track to open 76 gross new stores across its brands in its 2024 financial year (45 in B&M UK, 11 in B&M France and 20 in Heron Foods).

CEO Alex Russo said: “The performance across the Golden Quarter has been pleasing, with strong operational execution across the three businesses. Our strategy remains unchanged – we are an everyday low-price discounter with a laser-focus in keeping excellence in retail standards and our costs the lowest. This allows us to provide our products at the best price to all customers – many of whom continue to face significant cost of living pressures.

B&M reiterated guidance of £620m-£630m group adjusted EBITDA, driven by a strong store opening pipeline and disciplined cash generating growth.

Elsewhere this morning, overall UK retail sales had a “disappointing” festive period, with non-food retail in decline in the period.

According to the BRC-KPMG Retail Sales Monitor for December, UK total retail sales increased by 1.7% in December, against a growth of 6.9% in December 2022, which was below the three-month average growth of 2.3% and the 12-month average growth of 3.6%.

Food sales increased 6.8% on a total basis over the three months to December.

However, non-food sales decreased 1.5% on a total basis over the three-months to December and were in decline in December itself.

Over the three months to December, in-store non-food sales decreased 1.3%, while online sales decreased by 0.8% in December, against a decline of 3% in December 2022.

Over the full year, UK total retail sales increased by 3.6% from 2022.

This growth was entirely driven by food growth, which was 8.1% in 2023, as non-food declined by 0.1% for the year.

BRC CEO Helen Dickinson said: “The festive period failed to make amends for a challenging year of sluggish retail sales growth, as weak consumer confidence continued to hold back spending.

“The post-Christmas sales were unsuccessful in enticing spend in areas such as furniture and homeware, with households remaining cautious about making larger purchases. Sales saw a slight uptick in the week leading up to Christmas as consumers scrambled to purchase last minute gifts, particularly online, due to the wet weather. In gifting, beauty products were the standout performer, and toys and gaming also sold well.

“2024 looks to be another challenging year for retailers and their customers, and spending will continue to be constrained by high living costs. Retailers will also have to juggle various cost pressures, including the rise to business rates this April. This will be compounded by other emerging issues, such as the disruption to shipments from the Far East via the Red Sea. Political parties must consider this backdrop when they set out their plans for retail in manifestos so they can help support the industry to grow, invest, and serve customers.”

Paul Martin, UK head of retail, KPMG, added: “The festive feelgood factor was lacking this year as many retailers faced a disappointing December with sales growth only up 1.7% on 2022.

“Christmas shoppers ditched clothing, jewellery and technology gifts, opting for beauty, health and personal care products, which, along with food and drink drove festive sales this year. Online sales remained in negative territory, although the decline was weaker than seen in recent months with sales down nearly 1% on last year.

“Despite falls in inflation, an upcoming cut in national insurance rates, and some consumers having more money in their pockets this Christmas than last, the constant drip of economic challenges they’ve faced over the last two years has finally come home to roost. As we start a new year, cautious consumers are battening down the hatches and retailers can expect to see significant downward pressures on demand in the opening months of this year, which will ease off by spring if the economic conditions continue to improve and confidence slowly returns.”

Sarah Bradbury, CEO, IGD, said of food and drink sector performance: “We leave 2023 on an encouraging note for food and grocery as December sales saw an increase on 2022. While these were down by a month-on-month comparison – continuing the trend seen in October and November – this is likely caused by falling food and drink inflation which has dropped for the eighth consecutive month.

“Volume increased slightly vs December 2022, with Christmas week seeing the largest weekly year-on-year volume increase since April, likely helped by retailers cutting the prices of essential Christmas dinner vegetables.”

Consumer card spending grew 2.3% year on year in December – less than the latest CPIH inflation rate of 4.2% and lower than November’s growth of 2.9%,

According to data from Barclaycard, retail spending struggled to maintain the momentum it had built up in November through early seasonal discounts, though entertainment and travel thrived as consumers booked experiences and getaways for 2024.

Spending on essential items slowed, rising just 1.8% compared with 3.3% in November, as falling petrol prices continued to impact fuel spending (–12.5%). Meanwhile, the deceleration in food price inflation meant supermarket shopping saw its lowest uplift (2.8%) since September 2022 .

On the other hand, food and drink specialist stores – including butchers and delicatessens – saw a notable uptick in spending (5.1%), as consumers chose to invest in more premium, seasonal ingredients and to support their local businesses in the run up to Christmas.

Spending on non-essential items rose 2.5%, as festive activities and celebrations boosted the hospitality and leisure sector (up 8.9%).

Christmas parties and gatherings fuelled spending at pubs, bars and clubs (7.9%), while restaurants, though still in decline (–8.8%), had their best month since August.

The entertainment sector was a particular bright spot, seeing noticeable growth (12.3%) following a 1.7% decline in November.

However, both clothing and department stores fell back into decline (2.0% and 0.2% respectively), after witnessing a spike in November. This is likely due to retailers starting their festive promotional activity earlier in 2023, which encouraged consumers to shop for Christmas party outfits and gifts in November rather than December to take advantage of the best deals.

Karen Johnson, head of retail at Barclays, said: “Hospitality and leisure businesses will be encouraged by December’s strong growth, particularly in the entertainment category, which saw growing demand for live shows, new films and TV series.

“Meanwhile, grocery and retail spending didn’t see as much of an increase as we might have expected during the height of the festive season. This is likely due to many retailers and supermarkets starting discounts and promotional activity earlier than usual, meaning that many consumers had been making the most of these deals and completed most of their Christmas shopping by December.

“While the upcoming energy price cap is weighing on consumers’ minds, the falling rate of inflation offers a glimmer of positivity and it’s encouraging to see the nation’s optimism increase slightly as we head into a new year.”

Jack Meaning, chief UK economist at Barclays, said: “We saw inflation fall significantly at the end of 2023, and we expect it to fall further in the opening months of 2024. This puts more spending power in the pockets of UK consumers and should help support them to continue to spend, even against the tough backdrop of weak economic growth.

”It’s also encouraging to see tentative signs of an improving mortgage market; approvals have begun to rise and mortgage rates are continuing to fall. However, it’s worth remembering that many people this year will still be dropping off of fixed-term mortgages onto new deals with higher rates than they had previously, eating away at some of their newly found spending power.”

On the markets this morning, the FTSE 100 is up fractionally at 7,697.1pts.

Risers include Naked Wines, up 2.9% to 57.7p, Greencore, up 1.9% to 99.1p and Premier Foods, up 1.4% to 137.1p.

Fallers include THG, down 2% to 72.5p, Greggs, down 1.6% to 2,514p and Deliveroo, down 1.4% to 128.5p.

Yesterday in the City

The FTSE 100 opened the week edging up by 0.1% to 7,694.2pts.

However, it was a stronger day in general for consumer stocks.

Grocery risers included Just Eat, up 4.2% to 1,246p, Science in Sport, up 3.6% to 14.25p, Nichols, up 3.2% to 1,125p, B&M European Value Retail, up 3.2% to 561.8p, Marks & Spencer, up 2.2% to 290.5p, WH Smith, up 1.9% to 1,328p, Domino’s Pizza Group, up 1.8% to 376.2p and Pets at Home, up 1.8% to 310.6p.

The day’s few fallers included McBride, down 1.8% to 89.6p, Virgin Wines, down 1.3% to 38p, Greencore, down 0.9% to 97.3p and Hilton Food Group, down 0.5% to 761p.