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UK supermarket sales grew by 8.7% last month, according to new data from NIQ, as sales volumes stabilised amid slowing inflation and increased promotions.

Total till sales at UK supermarkets have grown 8.7% in the last four weeks ending 4th November 2023 according to new data from NIQ (previously known as NielsenIQ).

It said this growth comes against the backdrop of slowing inflation and an increase in promotional activity (24%, up from 21% last year) by supermarkets as well as consumers uncertain about spend.

Volume sales improved in the last 4 weeks to a reduction of 0.2% compared to this time last year.

However, with the average spend per visit increasing to £20.20 (up from £18.60 this time last year) shoppers remain cautious when spending on food and drinks and are likely preserving their spending power ahead of the festive season.

This has impacted sales for general merchandise, such as Halloween items, toys, clothing and homewares, with weak sales (down 4.9%) at major supermarkets.

NIQ data also reveals that a slowdown in inflation has led to a decrease in supermarket visits compared to last year, as shopping behaviours have begun to normalise. Online sales have grown 5.1%, with the online share of FMCG remaining at 11%.

In terms of retailer performance, Aldi (+17.7%) and Lidl (+19.1%) continued to grow market share, and Sainsbury’s (10%), Tesco (+9.6%) and M&S (+14.4%) also had strong sales growth. Ocado (+11.5%) also grew its market ahead of Christmas.

On a category basis, the Halloween and half term period led to an uplift in confectionery sales (+15.3%), followed by Meat, Fish & Poultry (+10.4%) and Packaged Grocery (+10.2%).

However, Beer, Wine and Spirits (+2.3%) and Household (+2%) had weaker growth.

Mike Watkins, NIQ’s UK Head of Retailer and Business Insight, said: “This Autumn, shoppers have been carefully managing their grocery budget and making trade offs with other spending which means the supermarkets will need to get shoppers into the mood to spend as we get closer to December. Christmas campaigns will be more important than usual as shoppers are looking for smart savings and good reasons to spend. Many shoppers will be holding out for a few more weeks with the hope of not missing out.”

Watkins continues: “All eyes will now be on the top two retailers, Tesco and Sainsbury’s to pull off a strong performance in the weeks ahead. M&S will also be optimistic of significant growth and we also expect the discounters Aldi and Lidl to gain market share this Christmas. All five retailers are also expected to drive strong growth in premium food and drink when shoppers finally embrace the festive spirit.”

Morning update

Imperial Brands has delivered a full year profits uplift as strong tobacco pricing across all key markets mitigated volume declines.

Excluding Russia, tobacco price mix was up 8% in the year to 30 September, with pricing up 11% and adverse mix reducing overall price/mix by 3%. The adverse mix effect was driven primarily by adverse product mix in the USA (mass market cigars and cigarettes)

Overall tobacco volumes were down 10.4% driven by the company’s exit from Russia and weakness in US mass market cigars

Excluding Russia, tobacco volumes declined 7.1%, as anticipated against a stronger prior year comparator, down 1.2%.

Next generation products revenues were up 26.4%, driven by growth across all categories. NGP net revenues were up 40.4% in the period.

Overall reported revenue declined -0.2% to £32.5bn, reflecting lower excise partially offset by higher Logista revenue.

Group adjusted operating profit grew 3.8%, driven by its tobacco portfolio and Logista. Excluding Russia, group adjusted operating profit grew 3.9%.

Reported operating profit grew 26.8% because charges relating to its Russia exit last year were not repeated.

CEO Stefan Bomhard commented: “Three years into Imperial’s transformation, our investments in consumer capabilities, changes to the way we work, and a new performance culture are translating into stronger, more sustainable operational and financial outcomes. In combustible tobacco, improving brand equity and investment in our salesforce capabilities has led to the third consecutive year of stable or growing aggregate market share in the five priority markets which account for 70% of our operating profit. At the same time, we have offset structural volume declines with strong pricing in all key markets.

“In next generation products, our challenger approach, which combines partnership-based innovation with disciplined market entry, is delivering positive results. We now have credible propositions across all categories - vape, heated tobacco and oral nicotine. Following recent launches, we now offer consumers potentially reduced-harm choices in more than 20 European markets, as well as the United States. This step-up in investment in Europe has driven an acceleration in net revenue growth.

“Underpinning this broad-based progress is our continued transformation, which includes new innovation hubs in Liverpool, Hamburg and Shenzhen, modernisation of legacy systems, and investments in upskilling our leaders.

“All of this means we are well placed to deliver on our commitment to enhance returns to investors, with increases to both our dividend and buyback programme. Looking ahead, we expect the continuing benefits of our transformation to enable a further acceleration in our adjusted operating profit growth in the final two years of our five-year strategy. We look forward to building on our growing operational track record to deliver sustainable returns to shareholders and play a positive, distinctive role in this industry’s transition to a healthier future.”

Elsewhere, cake retailer Cake Box continued its trading momentum in the first half of its financial year.

The retail posted overall revenue growth of 6.8% and an increase in total franchise store sales of 12.9%, “reflecting the strength of our proposition and continued robust customer demand”.

Franchise store like-for-like sales were up 6.2% (compared to a reduction of 1.6% in the same period last year) for the first half of the new financial year, compared to 3.4% in the second half.

Its new website, launched in Junes 2023 and investment in its marketing team increased online sales by 15.1% year on year.

It opened another nine franchise stores during the period, despite the sharp rise in UK base interest rates. As a result, the total number of stores at 30 September 2023 rose to 214 from 196.

Gross margins increased to 49.6% from 47.7% last year due to the partial easing of input cost increases and enhanced yield benefits achieved in the distribution centres.

EBITDA was up 10.4% to £3.1m from £2.8m.

Cake Box said trading has continued positively post the half year, with total franchise sales 5.1% ahead in October 2023 compared with the same period in the prior year and online sales increasing 12.8% versus last year.

Therefore it is on track to deliver a full year performance in line with market expectations.

CEO Sukh Chamdal commented: “We have performed well in the first half of the year, generating strong growth across key financial metrics and making further progress on our strategy. We achieved double digit increases in profits, cash and dividends, as raw material and input costs stabilised, and we started to benefit from the recent investments we have made in the business to drive growth.

“Our new website has increased online sales and improved customer experience and loyalty, while brand awareness continues to increase as a result of the success of our marketing campaigns (including national radio) and multi-channel expansion.

“Our franchise proposition remains attractive with nine new franchise stores opening over the period and a strong pipeline of future openings. We continue to engage with property consultants to identify target growth areas, which will help us reach our 400-store target over the medium term. We are also excited to launch our new Cake Box identity in the second half of the year, which will broaden the appeal of our brand to new customers and demographics, amplifying the opportunity for new store openings.

“While we are mindful of the ongoing macro-economic uncertainty, customer demand remains robust, demonstrating Cake Box’s enduring appeal. We enter the second half with momentum and are on track to deliver full year performance in line with market expectations. The Board remains confident in the Company’s long-term prospects, underpinned by our ambitious growth strategy, the attractiveness of the brand and focused investment programme.”

Finally this morning, Delivery Hero has posted an acceleration of growth to 9% and continued to improve its bottom line.

Total segment revenue improved by 16% year-on-year as a result of improved monetization, driven by AdTech, service and subscription fees.

Strides were taken towards profitability, with Delivery Hero on track to improve adjusted EBITDA by more than EUR 850m in FY 2023, despite FX and hyperinflation headwinds

The company is on track to reach EBITDA/GMV margin of more than 0.5% for FY 2023 and more than 1% in H2 2023.

Additionally, the company raised its guidance for GMV growth to the upper end of 5-7% year-on-year guidance in 2023.

Niklas Östberg, CEO and Co-Founder of Delivery Hero, said: “We are super excited by our progress as we drive the business towards positive Free Cash Flow. We doubled down on tech and innovation initiatives, delivering solutions for our customers while also optimizing our operations both on a country, regional, and global level. I’m very grateful to our teams around the world for the strong developments they made this quarter.”

On the markets this morning, the FTSE 100 is down 0.1% at 7,421.2pts.

Risers include C&C Group, up 1.6% to 137p, Greencore, up 0.7% to 94.3p and FeverTree, up 0.6% to 1,088p.

Fallers included DS Smith, down 2.6% to 289.7p, PayPoint, down 2% to 550p and Cranswick, down 1.4% to 3,572p.

Yesterday in the City

The FTSE 100 opened the week up 0.9% at 7,425.8pts yesterday.

Risers included Just Eat Takeaway.com, up 4.4% to 1,152p, Naked Wines, up 3.8% to 29.8p, McBride, up 3.4% to 49.3p, Bakkavor, up 2.8% to 87.4p, British American Tobacco, up 2.6% to 2,542.5p and Premier Foods, up 2.4% to 129.6p.

Fallers include Carr’s Group, down 2.2% to 112.5p, Tate & Lyle, down 1.7% to 625p, C&C Group, down 1.2% to 134.8p, Hotel Chocolat, down 1.1% to 134p and Nichols, down 0.6% to 934p.

 

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