If even M&S is worried about growth, what hope is there for the stragglers?

No comments

It’s the new year and that means January sales. But while Asda, Morrisons, Iceland and Poundland have done their best, the mood music among many of the leading grocers is muted.

That’s because inflation is back on the agenda. After working hard to bring it down, pulling out the stops this Christmas to deliver value for shoppers, the hope is still that commodity outliers such as coffee, cocoa and olive oil will fall.

But retailers are admitting that inflation is going in the wrong direction, with increased employee costs, further duty hikes and environmental regulation expected to limit opportunities for value investment (and job creation). And the imminent return of Donald Trump to the White House, already predicted to play havoc on trade through tariffs, is also impacting in unexpected and unwelcome ways, with sterling devaluation (in itself a complication) and surging UK gilt yields undermining the financial headroom chancellor Rachel Reeves had built in – creating the prospect that either further tax hikes are in store, or the government will need to cut departmental costs.

So the message from retail leaders this week has been cautious, with pledges to keep on keeping on, responding robustly, as the industry has done often these last four years, to obstacles in whatever shape or form.

With “the prospect of living costs rising again” Aldi CEO Giles Hurley vowed to “ensure the price gap” is “as big as ever” with the traditional full-price supermarkets.

Tesco’s Ken Murphy said “there’s plenty for people to think about” but predictions on inflation he would leave to economists. “What we will be looking at is all the variables. There’s a lot that can move. But you can rely on us to work really hard to mitigate from a customer point of view… and to invest in pricing wherever possible.”

And M&S boss Stuart Machin was more outspoken, calling on the government to come up with a growth plan, despite M&S itself achieving the highest growth of all the bricks & mortar retailers. Point is: if the fastest-growing retailer is worried about growth, what hope is there for the stragglers?