City snapshot: Grocery sales fall as shoppers stay away from stores

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The last Kantar grocery market share figures found total grocery sales fell 1.9% in the 12 weeks to 31 October, but remain 7.3% higher that the corresponding pre pandemic period.

Kantar said consumers’ shopping behaviour is beginning to stabilise but that shoppers are still making 40 million fewer trips to supermarkets per month than in 2019, while a fifth of households order their groceries online each month.

Fraser McKevitt, head of retail and consumer insight at Kantar, commented: “Our shopping habits are beginning to settle at a new baseline as we’ve adapted our lifestyles through the pandemic. The general trend towards bigger, less frequent trips to the supermarket seems set to stay. Households visited the supermarket 15.7 times in the past month on average.

“That’s a slight increase from the 15.3 trips we saw at this time in 2020, but consumers are still making 40 million fewer trips per month than they were in 2019. At this rate of change, it would take three years to get back to our old shopping patterns.”

Tesco was the only grocery retailer in growth over the period, with its sales up 0.3% to take its two-year sales growth to 9.4%.

Asda and Sainsbury’s were down 2.3% and 2.8% respectively, while Morrisons fell 4.3% - though Morrisons is up 6.6% on a two-year basis compared to 4.6% at Sainsbury;s and 2.5% at Asda.

Aldi and Lidl sales were down 0.4% and flat respectively, while Co-op fell 3.8%, Waitrose by 2.7% and Iceland by 3.9%.

Online sales levelled out, with digital sales accounting for 12.4% of the total grocery market for the second month in a row.

That meant Ocado sales were down 2.1% in the period, though two year sales growth was 35.7%.

Like-for-like grocery price inflation stands at 2.1% in the latest four weeks, its highest level since August 2020.

In the latest 12 weeks, inflation is 1.5%. Prices are rising fastest in markets such as savoury snacks, canned colas and crisps while falling in fresh bacon, vegetables and cat and dog treats.

McKevitt commented: “Grocery prices are rising and this month inflation hit its highest rate since August 2020, when retailers were still cutting promotions to maintain stock on the shelves. As prices increase in certain categories, we can expect shoppers to continue to visit several supermarkets and shop around to find the best deals. Already, households visit an average of 3.3 supermarkets per month in order to find the best value for money.”

Morning update

Strong food performance at Associated British Foods mitigated a drop in Primark sales as pandemic restrictions closed shops, to leave the FTSE 100 company larger flat for profits and revenues year-on-year.

ABF said total revenue for 53 weeks to 18 September were £13.9bn, which was in line with last year at actual exchange rates and was 1% ahead at constant currency.

All of its food businesses delivered growth and in aggregate sales were 5% ahead of last year at constant currency.

Grocery revenues were 3% ahead of last year at constant currency with particularly strong growth in Twinings Ovaltine more than offsetting expected decline in sales at Allied Bakeries, while AB World Foods delivered a record sales year.

Meanwhile, AB Sugar delivered strong trading performance with revenue was 8% ahead of last year at constant currency with higher domestic and regional volumes for Illovo as well as higher prices in Europe and Africa.

Primark sales in both years were impacted by trading restrictions and store closures as a result of government measures taken to contain the spread of COVID-19. The periods of closure were longer this year compared to the last financial year and sales declined by 5% at constant currency as a result.

Adjusted operating profit this year of £1,011m was also broadly in line with last financial year.

The adjusted operating profit for Grocery, Sugar, Agriculture and Ingredients combined increased by a strong 10% at constant currency. Primark operating profit margin improved this year with an adjusted operating profit of £415m, before repayment of job retention scheme monies of £94m, which compared to £362m last financial year.

Statutory operating profit for the year at £808m was broadly in line with last year after ABF incurred a net exceptional charge of £151m largely driven by a writedown of its Spanish Sugar business, Azucarera.

Looking forwards, ABF warned it is seeing “significant cost increases” in energy, logistics and commodities in addition to the impact of widely reported port congestion and road freight limitations.

“Our businesses are working to offset the impact of these through cost savings,” it stated. “Where necessary, our food businesses will also implement price increases.”

CEO George Weston commented: “Our financial performance this year more than ever demonstrates the resilience of the group. This comes from the strength of our brands, the diversity of our products and markets, our geographic spread, conservative financing and an organisation design that permits fast and flexible decision-taking.

“Given the strength of our balance sheet and our confidence in the future we are setting out today a new capital cash allocation policy that provides the Group with the capital it needs both for investment and financial stability while allowing for enhanced returns to shareholders when appropriate. We are announcing a special dividend for shareholders today as a result.

“We have the people and the cash resources to seize the opportunities ahead and we look to the future with confidence.”

Elsewhere, Coca Cola Europacifc Parnters has posted its third quarter results, with volumes slightly down reflecting poor weather in Europe and renewed restrictions across its new Asian Pacific region.

Pro forma comparable volume fell 1.5% in the period and is down by 5.5% compared to 2019.

Away from home volumes began to recover, rising 4% reflecting continued recovery of foodservice and out of home consumption across Europe, while at home consumption fell 5%.

CCEP said it has seen improved recent trading, reflecting lifting of restrictions in API ahead of the summer trading period & continued recovery in Europe

Pro forma revenue per unit case up 2.0%, reflecting positive pack and channel mix in Europe driven by the improvement in away from home volumes and growth in immediate consumption packs alongside favourable price across CCEP.

Total group revenues were up 24% €3.9bn driven by the addition of its API region, with Europe revenues up 2% to €3.2bn.

GB saw particularly strong fx-neutral growth of 11% to €719m, while France was down 7.5%, Germany down 5% and Northern Europe down 4.5%. The only other European region in fx neutral growth was Iberia, up 7.5%.

CEO Damian Gammell commented: “Solid top-line growth and value share gains in the third quarter demonstrate the strength of our business and the ongoing successful integration of Coca-Cola Amatil, which also delivered a resilient performance despite renewed restrictions.

“Together with The Coca-Cola Company and our other brand partners, our focus on core brands, in-market execution and revenue growth management initiatives solidified our position as the largest FMCG value creator. We are also pleased to be making progress towards our ambition to reach net zero by 2040, including on our packaging commitments.

“We continue to protect our business for the short-term and are confident in our ability to mitigate near-term inflationary pressures and navigate global supply chain challenges as we head into next year. Key levers are pricing, mix, procurement initiatives and our transformational efficiency programmes. We’re combining these levers with disciplined investments for long-term future growth, particularly in our portfolio, our people, digital and sustainability.”

“Given our solid performance so far this year, and the lifting now of restrictions in API, we’re confident in delivering a strong end to the year and are raising our full-year guidance.”

CCEP is now guiding to comparable revenue growth of 29%-30% (previously 26%-28%) and comparable operating profit growth of 46%-49% (previously 40-44%).

Finally, this morning the monthly BRC-KPMG Retail Sales Monitor shows retail demand “getting back on track” ahead of Christmas.

On a total basis, sales increased by 1.3% in October, against a growth of 4.9% in October 2020, while total sales are up 6.3% compared to the same period in pre-pandemic 2019.

UK retail sales decreased 0.2% on a like-for-like basis from October 2020, when they had increased 5.2%.

Over the three months to October, food sales increased 1.5% on a total basis and 0.3% on a Like-for-like basis, which is below the 12-month total average growth of 4.7%.

Over the three-months to October, non-food retail sales increased by 1.8% on a total basis and decreased by 0.1% on a like-for-like basis, below the 12-month total average growth of 14.9%.

Online non-food sales decreased by 8% in October, against a growth of 39% in October 2020.

BRC CEO Helen Dickinson commented: “Customer demand is getting back on track ahead of Christmas as sales grew at a faster rate than the month prior, and well above its pre-pandemic levels. As social calendars started filling up with festivities, clothing and footwear sales performed well. Meanwhile, furniture and electrical sales were held back by global logistical issues and microchip shortages.

“Retailers are doing everything they can to offer customers the choice and availability required throughout the industry’s busiest period, prioritising the food and other festive products needed to celebrate. Retailers are hopeful that demand will continue right through the golden quarter, however, there are challenges ahead with higher prices on the horizon compounded by the many increasing costs faced by consumers such as higher energy bills and rising national insurance.”

Paul Martin, UK Head of Retail at KPMG, added: “The much reported squeeze on household spending has yet to materialise as consumers seem happy to carry on shopping. Limited availability of stock has created strong pricing dynamics, which means we are unlikely to see any big discounting this Christmas, and many retailers will be hoping consumers are willing to buy the most sought after gifts at any price.

“With rising costs putting a strain on most retailers, they will be placing all hopes that demand remains strong as consumers plan for a bumper Christmas, shopping early for those much wanted gifts and spending more than last year when Christmas gatherings were cancelled. The main concern is now how trade will develop post-Christmas into 2022. “

IGD CEO Susan Barratt, commenting on food and drink performance, said: “The food and drink sector saw another muted performance in October, with sales down versus 2020, when shoppers increasingly stocked up ahead of the second lockdown in November. Preparations for Halloween 2021 offered a slight boost to performance, though the actual day fell out of the reporting period.

“Helping shoppers navigate through rising prices while also addressing environmental concerns will be a key challenge for the food industry.”

On the markets this morning, the FTSE 100 is up 0.1% to 7,307.6pts.

Early risers include ABF, up 6.3% to 1,976p, Nichols, up 2.5% to 1,239.6p and PZ Cussons, up 2.4% to 209.5p.

Fallers include Parsley Box, down 3.2% to 45p, McColl’s Retail Group, down 2.9% to 19p and Naked Wines, down 2.9% to 691.6p.

Yesterday in the City

The FTSE 100 stared the week flat, edging down 0.1% to 7,300.4pts on Monday.

There were more grocery fallers than risers, with those stocks losing ground including Parsley Box, down 4.1% to 46.5p, PZ Cussons, down 3.8% to 204.5p, SSP Group, down 2.8% to 272.6p, Hilton Food Group, down 2.7% to 1,170p, Naked Wines, down 2.6% to 712p and THG, down 2.5% to 198.7p.

The day’s risers included Sainsbury’s, up 1.7% to 289.2p after its half year results on Thursday, Devro, up 0.9% to 216.5p, FeverTree, up 0.9% to 2510p, Kerry Group, up 0.9% to €115.00, Bakkavor, up 0.8% to 120.4p and Nichols, up 0.8% to 1,210p.