The big four might be steeling themselves for a long, tough 2015, but life at the premium end of the grocery market continues to be far more enjoyable.
Waitrose announced its Christmas trading figures today – the performance looks strong by any measure, let alone compared with supermarket contemporaries haemorrhaging sales.
For the five weeks ending Saturday 3 January 2015, Waitrose clocked up sales (excluding fuel) of £728m – a year-on-year jump of 7%. Much of Waitrose’s recent growth has been from new stores (typically accounting for around 5%), but the supermarket also saw solid like-for-like growth of 2.8% during the period.
That 2.8% growth is likely to outstrip the growth rate of food at fellow premium grocer M&S (expected to be around 1%) and stands in even more marked contrast to the like-for-like declines at the three listed supermarkets and flat growth of Asda.
After Waitrose experienced something of a summer growth wobble, it’s difficult to argue with CEO Mark Price’s verdict that its Christmas trading represented a “strong sales performance in a tough trading environment”.
Shore Capital’s Clive Black said: “We believe that Waitrose’s performance will stand up very well against the superstore groups… All credit should go to Waitrose for cranking out such a robust performance to our opinion. “
Are there any caveats? The cynical might point to the lack of granularity in the numbers as Waitrose is not bound by the onerous reporting requirements of the public markets. Certainly Waitrose won’t provide profit figures for some time and when they are published they are likely to be well below the rate of sales growth (the supermarket’s profits fell 9.4% in the six months to 26 July despite strong sales growth).
However, Price talks of Waitrose being able to take a “long-term view” – suggesting that being unencumbered by quarterly profit updates has enabled the supermarket to concentrate on growing footfall and sales rather than striving to maintain profits at any cost. Certainly the latter approach did Tesco few favours in 2014.
Another question mark will be what happens to Waitrose’s online offer over the next couple of years.
Grocery sales through Waitrose.com grew by an impressive 26.3% during the period, but a large proportion of Waitrose own-brand online sales are still through Ocado. Waitrose announced today it will shut its existing online distribution centre in Acton in Spring 2015, but this is part of a plan to grow capacity as its new fulfilment centre in Coulsdon opening in March 2015 is twice as big.
Crucially Waitrose can serve notice on its Ocado agreement in September this year – industry views are split on whether Waitrose will decide to pull the plug. One school of argument suggests that the situation where Waitrose and Ocado are competing in London is unsustainable and Ocado’s relationship with Morrisons has muddied the brand differentiation Waitrose sees as crucial.
Alternatively, Ocado remains Waitrose’s biggest customer and its national distribution network is far in advance of Waitrose’s current capabilities.
Those questions will doubtless be answered in the months to come – but for the time being when it comes to deciding the winners and losers of Christmas 2014, Waitrose will decisively be in the former pile.