Wednesday brought a mixed bag of a data for supermarkets as figures showing broad industry growth were tempered by worries over mounting inflation and the resurgence of the discounters.
On the surface, the monthly market share numbers from Kantar Worldpanel contained plenty of cause for encouragement. Each of the big four saw a solid rise of sales in the 12 weeks to 21 May, led by Morrisons up 1.9% and Tesco up 1.8%, while Sainsbury’s and Asda were up 1.7% and 0.9% respectively. Overall grocery sales were up by 3.8% year on year.
But Tesco and Morrisons’ shares fell 0.8% to 183.9p and 0.3% to 246.8p respectively. Only Sainsbury’s had reason for cheer, rising 0.4% to 280.8p largely because of its stellar 5.2% rise in general merchandise sales providing further evidence its bold acquisition of Argos is paying off.
The City’s less than euphoric reaction is largely explained by concerns that headline sales growth is masking further structural problems for the industry. Kantar measured grocery inflation rising to 2.9% during the 12-week period, meaning that sales growth across the top four remains significantly lower than inflation. As such, the big four are continuing to lose market share.
Barclays noted that Sainsbury’s, Morrisons and Asda all saw modest reductions in their market share losses, compared with the average of March and April, but that Tesco saw its share losses increase slightly. It also notes “volumes have come under some pressure over recent months as inflation has risen”, but suggests grocery inflation may be reaching its peak. Bernstein highlighted that just 100bps separates the fastest and slowest-growing of the major mults, down from 720bps in November 2016. “That matters as it means supermarkets aren’t battling each other but rebuilding at the same time,” the broker argued.
One clear winner from the market share data was Ocado, which jumped 1.6% to 313.4p on Wednesday after Kantar found sales growing at 9.4% during the 12-week period.
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