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UK grocery growth rebounded last month, with the early September heatwave helping lift grocery sales at UK supermarkets back into double-digit growth.

According to new data from NIQ, total till sales were up 10.3% in the four weeks ending 9 September 2023 compared with the same period last year, up from 7.2% growth during the wet July and early August.

NIQ found that growth at the grocery multiples during the four-week period increased by 7.2%, and peaked at 10.2% in the week ending 9 September, in which the UK experienced a heatwave.

Volume sales during this week also improved to by 2.1% for the first time since the first week of May 2023, suggesting improved consumer willingness to spend.

Volume sales over the four-week period stabilised at –0.7%, but this is up from –3.8% last month.

As temperatures soared, consumers went to stores and purchased more fresh food items. A total of £172m was spent on fresh poultry (value sales up 13% and volumes  up 5%) in the four-week period. Sales also grew for fresh produce (value growth of 11.8% with volumes up 2.1%) which included seasonal foods such as tomatoes and lettuce.

In terms of individual retailer performance Tesco, M&S and the discounters grew market share over the 12 weeks.

Tesco sales were up 9.9% and Sainsbury’s 8.7%, with Asda at 4.7% and Morrisons at 1.4%.

Nearly one in three households shopped at M&S – almost the same as Co-op – with sales growth (11.8%) helped by the opening of new food halls across the country.

Aldi (up 19.6%) and Lidl (up 16.6%) continue to outperform across all shopper metrics with new shoppers, more visits and higher spend per visit contributing to a market share of 20%.

Mike Watkins, NIQ’s UK head of retailer & business insight, said: “The warm weather has led consumers to shop more in-store, but online penetration remains unchanged in the last four weeks, which has been an underlying trend this year. Shoppers are still using this channel but habits have changed. As they visit stores more often, consumers are reducing grocery spending online as they shop around to find the best prices. Shoppers go into a store around four times a week but place online grocery orders on average around twice a month.

“There are some improvements showing in shopper sentiment as inflation continues to slow and there is now a growth in real incomes. Retailers are keen to pass on price cuts as inflation continues to slow. However, they also need to make sure that messages resonate with price-conscious consumers, as for some, their discretionary spending power is still limited.

“We know there is a polarisation of purchasing power with 44% of households impacted only a little or not at all by increased cost of living, yet 56% of households are moderately or severely affected, leaving them budgeting carefully. The good news is that fmcg volumes are starting to improve against the declines of last year so we expect total till growth to be around 7% in Q4 and volume growth at food retailers in December.”

Morning update

On a busy morning, Ocado Retail has grown its revenue by 7.2% in the third quarter to £569.6m.

This represents an trading improvement on the 5% growth reported during the first half and saw a return to positive volume growth in the last month of the quarter.

Average orders per week grew 1.9% year on year to 381,000, lapping a strong customer acquisition push this time last year.

Active customers reached 961,000 at the end of Q3, up 1.5% year on year, with the number of mature customers (who have made five shops or more) growing by 6.6%.

Average basket value was up 4.2% while basket size remained broadly stable quarter on quarter at 44 items per order.

Ocado noted its “positive momentum” heading into its important fourth quarter, but full-year guidance remains unchanged.

Ocado Retail CEO Hannah Gibson said: “It has now been a year since I joined Ocado Retail and in January we set out our Perfect Execution strategy, making sure every element of our customer proposition and our operating model is at its best.

“We are delivering on this plan and have great momentum in the business, with revenue growing faster in Q3 than in H1 and a return to positive volume growth in the last month of the quarter. The continued progress in Q3 underpins our confidence in delivering our FY23 guidance of mid-single digit revenue growth and full year profitability, and we have started the final quarter positively.

“We continue to deepen our collaboration with M&S, including hundreds of new M&S lines set to launch in the autumn. Together with our partners, we are intent on bringing even lower prices, more choice, and greater convenience to our customers. We are making good progress, but we want to go even further.

“I would like to thank the great team at Ocado for their relentless focus on the needs of our customers, as they navigated the cost of living crisis. Together, we look forward to building on the growing momentum of the business and continuing to raise the bar in online grocery through the rest of this year and beyond.”

Elsewhere, Naked Wines has fallen to a £15m pre-tax loss amid falling sales and one-off charges and writeoffs.

The online wine group’s total sales were up 1% year on year to £354m, but that represented an 8% slowdown on a 52-week comparable basis.

Adjusted EBIT improved to £17.4m, ahead of guidance of £13m-£17m due to lower new customer investment

However, it fell to a statutory pre-tax loss of £15m from a £2.9m profit last year driven by non-cash goodwill impairment and inventory provision charges in the US.

Additionally, its 2024 financial year has started off “slower than expected” with Q1 revenues down 18% year on year due to sales to new customers being 41% lower and sales to repeat customers being 15% lower.

The group now expects full-year revenues to decline 8% to 12% as the prior period comparison eases in the second half of the year and the rate of decline in its customer base slows.

Adjusted EBIT is forecast to fall back to £8m-£12m

Newly returned chair Rowan Gormley apologised to stakeholders for the performance.

“The whole board of Naked Wines regret that your support and patience as shareholders, winemakers, angels and employees has not been rewarded. We are all determined to remedy that.”

However, he said the remodelled Naked management team “are acting decisively to steer Naked through this period”.

“They are highly motivated and determined to ensure that all stakeholders are rewarded for their support,” he said.

CEO Nick Devlin commented: “The trading environment is tough, but Naked remains highly resilient. We have taken decisive action and have met the key goals in our “pivot to profit” strategy. Our focus now is on delivering profitable growth.

“We recognise that the environment is likely to remain tough and are configuring the business to be profitable and cash generative despite challenging conditions. A leaner and more focused Naked will be best placed to deliver for our customers and winemakers. I believe we can emerge from these challenges a stronger business.

“I want to thank our teams and winemakers for their support and commitment over the past year. Across the board they have embraced a programme of rapid change and laid the foundations for future profitable growth.”

Private label households goods manufacturer McBride has seen a bounceback in sales and profits in the year to 30 June as pricing actions mitigated inflation.

It said its first six months of the year were characterised by a focus on margin and service recovery as the dual effects of pricing and input materials inflation from the preceding 12 months cycled through the business, with sales volumes relatively flat and the business break-even at the trading profit level.

However, the second half saw a “pleasing” return to volume growth and stronger profitability levels, driven by the stabilisation of materials prices, combined with McBride delivering new contract wins and a strong volume pull as there was a growing consumer shift towards private label products across all markets.

At a group level, revenue was up 31.1% to £889m, with £159.6m a result of the wrap-around effect of selling prices increases and £32.1m from higher volumes.

Volume growth of 5.6% was significantly ahead of the market, with private label increasing 7%. Second-half volumes were up 9.6%, all from private label.

That helped operating profit from continuing operations improve significantly on the prior year, increasing to £10.3m from a loss of £26.7m.

Adjusted operating profit increased to £13.5m from a loss of £24.5m, with adjusted operating profit in the second half of £14.8m compared to a first half adjusted loss of £1.3m.

It said the first two months of its new financial year have seen the momentum of last year’s second half continue.

However, our it said it remains vigilant to safeguard the business from short-term challenges arising from a still volatile macro environment and it will continue to focus on reducing debt and maintaining tight control of costs.

CEO Chris Smith said: “The decisive actions taken in the last financial year helped set the foundations for the strong recovery achieved across the business. In combination with the hard work and dedication of our teams, McBride has delivered an impressive return to profitability and volume growth in an environment that continues to be volatile. Inflation will remain a challenge for the business into the new year, one which we believe we are better positioned to manage, driven in part by our shift to three-monthly pricing.

“The second half of the year saw encouraging momentum across the group, underpinned by a number of new contract wins and the growing consumer shift towards private label products as cost of living pressures continue to impact buying behaviour. Importantly, we have continued to make good strategic progress across all divisions, with our Transformation programmes moving at pace. Overall, while the current macro environment continues to present challenges, McBride is well-positioned to deliver sustainable and profitable long-term growth.

“In the face of such clear and profound pressures, this set of results represents an excellent performance and is testament to the hard work of our teams, our commitment to customer service and the steps we have taken to strengthen the business and position it for long-term growth.”

Drinks supplier and producer C&C Group has posted a trading statement for the six-months to 31 August.

It expects to deliver net revenue of €870m in the period, which is down 1% on the comparable prior year period.

Operating profit for the first half is expected to be in the range of €29m-€31m and includes the significant majority of the one-off profit impact associated with Enterprise Resource Planning system implementation disruption in the group’s GB distribution business.

It said good progress had been made in resolving the ERP system implementation issues, in line with internal expectations.

Trading for its our own brands in Ireland and Scotland was “encouraging” in the period, with net sales revenues up 6% for the period. Trading at the start of H1 benefited from good weather, particularly in June. However, poor weather in July and August combined with cost of living pressures, particularly in GB, resulted in a slowdown in the latter months of the period.

Patrick McMahon, group CEO, said: “Set against a difficult market backdrop, we are pleased with the strength of the performance of our branded businesses in Ireland and Scotland in the period.

“We are particularly pleased with the progress we have made in restoring customer service levels following the ERP system implementation issues in our GB distribution business within our planned timeframe. Delivering outstanding service, winning back customers, continued business simplification and improved operating efficiency remain our top priorities and focus for the second half.”

Finally, retail tech firm Eagle Eye has posted strong revenue and profit growth for its year to 30 June.

It posted revenue growth of 36% to £43.1m and underlying organic revenue growth of 29%, excluding the contribution from Untie Nots.

Adjusted EBITDA was up 36% to £8.8m and profit after taxation increased by 114% to £1.2m.

The group continues to benefit from high levels of recurring revenue, providing a strong basis for continued positive performance, with growth in recurring revenues of 40% to over £33m.

The year saw the continued expansion of the customer base, adding Morrisons in the UK, Canadian department store Hudson’s Bay, Ikea in Taiwan, and expansions with Asda in the UK and Woolworths Group in Australia.

It also posted significant international revenue expansion, driven by the US (up 129%) and APAC (up 56%), including first customer in Singapore.

CEO Tim Mason said: “Eagle Eye’s outstanding performance in FY23 demonstrates we have the right strategy, offering and team in place to support our continued strong growth as an increasingly international business.

“In the current difficult economic environment, retailers are turning more and more to data-driven, personalised promotions and rewards as one of the most effective ways to drive increased trade and retain customer loyalty. Eagle Eye’s central position as the technology that enables the execution of these programmes means we are becoming increasingly relevant, providing further growth opportunities.

“We have entered FY24 in a strong position with considerable momentum across the group. We are particularly excited by the opportunity for EagleAI, our new AI offering launching in 2024, building on the capabilities brought into the group with the acquisition of Untie Nots.

“The quality of our team, offering and business model, alongside an expanding market opportunity, provide us with confidence in the continued success and significant long-term growth potential of Eagle Eye.”

On the markets this morning, the FTSE 100 is up 0.3% to 7,675.3pts.

Risers include C&C Group, up 3.4% to 136.5p, Nichols, up 3% to 1,065.5p and AG Barr, up 2.3% to 498p.

Fallers include Naked Wines, down 7.3% to 64.9p, McBride, down 2.8% to 42.9p and Kerry Group, down 1.8% to €81.40.

Yesterday in the City

The FTSE 100 opened the week falling 0.8% to 7,652.9pts.

McBride was up 8.6% to 44.1p ahead of its annual results this morning.

Other risers included Glanbia, up 5.1% to €15.88, Hotel Chocolat, up 4.7% to 121.5p, Ocado, up 3.1% to 787p, Kerry Group, up 2.1% to €82.88 and Naked Wines, up 1.5% to 70p.

Fallers included Greggs, down 4.7% to 2,422p, WH Smith, down 4.4% to 1,344p, Greencore, down 2.7% to 76.9p, Pets at Home, down 2.6% to 339.2p, SSP Group, down 2.4% to 238.6p and Fever-Tree, down 2.3% to 1,259p.

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