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Deflation continued to ease in December, according to the monthly BRC-Nielsen shop price index, with overall shop prices down 1.4% compared to 1.7% in the previous two months.

Non-food deflation decelerated to 1.9%, down from 2.3% in the previous month and the weakest deflation rate since June 2015.

Food deflation eased to 0.7% in December from the 0.8% fall in November and a 0.9% fall on a 3-month basis.

Fresh Food deflation remained at 1.2% for the second consecutive month, but ambient Food moved into inflationary territory for the first time since June 2016, up 0.1% in December from the 0.1% decline in the previous month.

Helen Dickinson, Chief Executive of the BRC said: “We’ve said for some time that we expect to see underlying inflationary pressures, notably from the post-referendum fall in the value of the pound, feed through into shop prices. It’s too early to confirm that this is what we’re seeing in December’s figures: timings of seasonal discounts can cause monthly fluctuations at this time of year and retailers have continued to find ways to mitigate the impact on consumers.

“However, we expect the general trend in inflation to be upwards over 2017. The magnitude of the exchange rate movement and commodity price rises combined with the increasing costs of doing business means that retailers will have little choice other than to pass on some of these rising costs into prices but effect will be lessened by the intensity of competition.”

Mike Watkins, head of retailer and business insight at Nielsen added: “Whilst the supermarket price war helped food prices to fall in the run up to Christmas, we are now seeing the first impact of the currency depreciation of the last six months, with increases in retail prices for some non-foods such as clothing.

“Over the next six months we can expect the return of shop price inflation but as the battle for the wallet of the shopper is so intense, this will be phased in by retailers and any increases are likely to be less than other sectors of consumer spend as measured by the consumer price index.”

Morning update

The first of the Christmas trading updates are beginning to appear, starting today with B&M European Value Retail (BME).

Group sales revenue for the quarter increased by 20.5% on a constant currency basis. On an actual currency basis, total sales revenue increased by 21.8% to £789.1m.

B&M has reported a 20.7% rise in sales for the 13 weeks to 24 December to £741.4m, with like-for-like growth of 7.2% in the quarter.

The stronger like-for-like growth reflects strong seasonal product performance, improved in-store standards for customers, the normalisation of service levels from our two new distribution centres, compared with last year and an extra day of trade (adding 1.1% to the like-for-like growth).

Jawoll’s sales revenues increased by 18.8% on a Euro basis, which equates to an increase of 43.2% in sterling to £47.7m versus the same period in the financial year 2015/16.

In the UK trading the group now has 533 stores, having opened 14 stores in the last 13 weeks and a net 34 in total during the financial year to date. Jawoll is now trading from 73 stores having opened 7 stores in the third quarter.

Simon Arora, chief executive, commented: “I’m delighted to report that B&M has delivered a strong performance through peak trading, reflecting a powerful return to trading form, helped by increased levels of operational stability in our stores and supply chain.

“We have once again demonstrated the strength, relative appeal and popularity of our model at a time of uncertainty for consumers generally and continuing structural change in the retailing sector. We have delivered our best ever Christmas trading and served over 5.5 million customers in a single week in the UK alone as we continue to gain market share. Our German business Jawoll has also performed well and our first steps towards a faster pace of expansion are going to plan.”

Elsewhere, Hilton Food Group (HFG) has signed a 50/50 joint venture agreement with Sonae Modelo Continente, Portugal’s leading food retailer, for the supply of a wide range of packaged beef, lamb, veal and pork products to Sonae stores in Portugal. This follows a period of approximately six months of co-operation.

Under the terms of the agreement, Hilton will work alongside Sonae to redevelop the production facilities of its packing and sourcing subsidiary Sonae Centro Processamento Carnes (CPC), which supplies Sonae stores in Portugal. CPC currently sources over 1,000 tonnes of packaged meat products per week. The JV will be named SOHI Meat Solutions.

SOHI Meat Solutions will supply product to all Sonae’s grocery stores and the partners believe that the JV will be in a position to increase the overall volumes supplied to the Portuguese market.

The facility will require an initial investment of €22m, financed principally by both companies, with Hilton’s share of the investment financed primarily by debt.

Hilton CEO, Robert Watson commented: “Our progress in Portugal demonstrates further the strength of Hilton’s flexible and versatile business model, enabling us to meet the local requirements of our customers in their territories. This now extends our presence to 15 countries, and we will continue to look for further opportunities for geographic expansion.”

Irish service station and petrol group Applegreen (APGN) has entered into a conditional agreement to acquire a 50% share in the Joint Fuels Terminal in Dublin port from the Topaz Energy Group for €15.7m which will be funded from existing resources.

The acquisition is subject to the satisfaction of a number of conditions and is expected to complete in Q1 2017.

The Joint Fuels Terminal, which is 50% owned by Valero Energy (Ireland) Limited, is one of three fuel importing facilities in Dublin port. The interest being acquired was previously owned by Esso Ireland.

Finally this morning, Yorkshire-based cold storage and transport business The Reed Boardall Group has announced a slight dip in annual revenues to £64.3m in the year to 31 March 2016 from £65.9m in 2015.

Serving leading retailers and food manufacturers throughout the UK, the company whose Boroughbridge cold storage facility is one of the largest in Europe said the slight fall in turnover compared to 2015 was attributable to a minor decrease in volumes due to the expected loss of a large customer part way through the financial period.

However, it said it has very quickly made up the volume of stock in store. Due to increased efficiencies within the business, profit before taxation saw a slight rise from £3.2m in 2015 to £3.4m in 2016.

Marcus Boardall, deputy chief executive, commented: “After more than 20 years as partners to some of the leading players in the British food sector, we have a tried and tested formula for cost effectively and reliably providing the integrated cold storage and transport services they need.

“With consumers shopping more frequently at outlets with restricted storage space, our customers are demanding smaller and swifter deliveries. This fits well with our business model of a 142,000 pallet storage facility operating on a single site, enabling us to respond quickly with ‘order today, delivery tomorrow’ as well as providing excellent value as we are able to combine products from various customers.”

On the markets this morning, the FTSE 100 has eased back slightly from yesterday’s record highs, falling 0.1% to 7,172.8pts.

Of those in the news this morning, B&M has surged 7.4% to 297.4p on the back of its strong like-for-like quarterly growth. Hilton Food Group is another 5.4% up to 680p on news of its JV and Applegreen is 0.9% up to 449p.

Poor Christmas results from Next this morning has driven down Marks & Spencer (MKS) by 5.3% to 326.2p and Primark owner Associated British Foods (ABF) by 3.1% to 2,626p. Meanwhile, there was some profit taking after Hotel Chocolat’s (HOTC) rise yesterday, with the shares back down 4.1% to 290.1p this morning. 

Risers so far this morning include Crawshaw Group (CRAW), up 7% to 24.2p, McColl’s Retail Group (MCLS), up 2.2% to 184p and Total Produce (TOT), up 1.2% to 165.9p.

Yesterday in the City

On the first day of trading of 2017 the FTSE surged to a new all-time high close of 7,177.9pts, after rising by a further 0.5% yesterday and setting a new high of 7205.4pts during the day.

The City began picking its winners and losers from the vital Christmas trading period, with the consensus seeming that the general merchandise retailers had a tough time.

Some of the day’s biggest falls were seen in clothing retailers, with Next (NXT) – which released a disappointing Christmas trading update this morning – down 4.3% to 4,770p and Debenhams (DEB) down 3.9% to 55.05p.

As such Marks & Spencer (MKS) fell 1.6% to 344.5p, but looked to have been supported by more positive sentiment around the food retail market. Sainsbury’s (SBRY) was up 1.2% yesterday to 252.5p and Morrisons (MRW) edged up to 230.8p, (TSCO) while Tesco dropped marginally 0.3% to 206.2p.

Elsewhere, Britvic’s latest Brazilian acquisition helped its shares up 1.3% to 574.5p, while PZ Cussons (PZC) was up 2.3% to 342p and SSP Group (SSPG) was up 1.5% to 392.8p.

Other risers included Hotel Chocolat (HOTC) up 4.9% to 302.5p, Hilton Food Group (HFG), up 3.9% to 645p, Finsbury Food Group (FIF), up 2.1% to 122.5p and Conviviality (CVR), up 2% to 220p.

Major fallers included Tate & Lyle (TATE), down 2.9% to 687p, Greencore (GNC), down 2.6% to 240p, and Reckitt Benckiser (RB), down 1.5% to 6,784p.

Also falling was McColl’s (MCLS), down 3.2% to 180p and Premier Foods (PFD), down 3.2% back to 45.3p.

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