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Supermarket sales fell by 1.9% over the past 12 weeks, despite inflation soaring to its highest level since 2009.

Take home grocery sales were down 1.9% in the 12 weeks to 12 June, according to the latest take-home grocery figures from Kantar, which represented the best market performance since October last year.

Over the latest four-weeks sales grew by 0.4% versus the same period in 2021.

However, this top line recovery reflected like-for-like grocery prices rose by 8.3% over the past month, up 1.3 percentage points on May to reach their highest level since April 2009.

Fraser McKevitt, head of retail and consumer insight at Kantar, comments: “The sector hasn’t been in growth since April 2021 as it measures up against the record sales seen during the pandemic. However, these latest numbers show the market is to an extent returning to pre-COVID norms as we begin comparisons with post-lockdown times.

“The inflation number makes for difficult reading and shoppers will be watching budgets closely as the cost-of-living crisis takes its toll. Based on our latest data, the average annual grocery bill is on course to rise by £380. This is over £100 more than the number we reported in April this year, showing just how sharp price increases have been recently and the impact inflation is having on the sector.”

On an individual basis all of the big four remained in 12 week decline, with Tesco down 1.1%, Sainsbury’s down 3.9%, Asda 4.8% and Morrisons 7.2%.

The discounters continue to grow market share – collectively up to 15.9% - with Aldi up 7.9% and Lidl up 9.5%.

All other grocers remained in decline, with Co-op down 4.4%, Waitrose down 6.4%, and Iceland and Ocado both down 2.3%.

Kantar said its data showed that consumers are taking steps to manage rising prices at the tills by swapping branded items, which have declined by 1.0%, for own-label products, which were up by 2.9% and reflected the boost to the discounters.

Store footfall rose by 3.4% over the latest four weeks, while online fell to its lowest proportion of the market since May 2020 at 12%.

Even with grocery inflation at a decade-long high, sales during the week of the Platinum Jubilee (to 5 June) were £87m higher than on average in 2022.

Over the full 12 week period, grocery inflation reached 6.7%, with prices are rising fastest in categories such as dog food, butter and milk, while falling in spirits.

Morning update

Ocado has raised £578m via a discounted share placement announce after the close of the markets last night.

The online supermarket placed 72,327,044 new shares with investors worth £575m, while 246,405 retail shares and 105,944 shares to senior management brought the total capital raise to £578m.

The shares were priced at 795p, which represented a discount of 9.4% to yesterday’s closing share price of 877.6p.

Ocado did not specify what the proceeds would be used for or why it was tapping investors for new funding.

Instead it more broadly said the cash was needed to “bring solutions to market even faster”.

It said the shift to online grocery accelerated significantly with the Covid-19 pandemic and industry data suggests that this change will continue, as customers continue to demand greater convenience for their online shopping.

Therefore it wants the extra funding to “support its current Ocado Solutions partners as the increase in online grocery demand globally” and that requires faster growth in fulfilment capacity.

It also wants to continue its investment in innovation and at a faster pace, while strengthening its position as the leading end-to-end solution provider for online grocery fulfilment globally over the long-term.

Meanwhile, it also announced a successful agreement on a new £300m revolving credit facility, provided by a syndicate of leading international banks.

Ocado shares have fallen 4.8% to 835.8p since opening this morning.

Elsewhere, packaging giant DS Smith has posted a double-digit rise in sales and profits despite volatile conditions and cost inflation.

Organic corrugated box volumes showed record growth of 5.4% across the year, reflecting continued growth in the resilient fmcg and other consumer related sectors, which represent over 80 per cent of its volumes, together with a recovery in the industrial sector.

DS Smith said that in a challenging supply chain environment, its scale, security of supply and high service levels have driven ongoing gains with our customers including large multinational companies.

Regionally, it saw particularly good performances in the US, Southern and Eastern Europe, while it benefited from structural market drivers of plastic replacement, consumer and retail channel evolution and e-commerce.

Looking forward, customer demand remains strong and it expects to see continued volume growth of 2-4% in the current financial year.

For the full year, revenue grew by £1.5bn (or 26%) on a constant currency basis and 21% on a reported basis, driven by corrugated box volume growth (£203m) and higher selling prices (£1.3bn) across the group.

Paper, recycling, and other packaging revenues increased (£23m) as higher pricing more than offset reduced volumes sold externally as the organic growth of packaging volumes meant it used a greater proportion of paper production internally.

Raw material, energy and transportation input costs all rose significantly over the comparative period. However, these were mitigated by supplier arrangements, long-term hedging positions and rising packaging selling prices.

Volume growth combined with increased packaging selling prices, partly offset by the increased input costs, resulted in adjusted operating profit growing by 29% on a constant currency basis and 23% on a reported basis to £616m.

Input costs increased by £1.2bn with rises in raw materials costs of £720m, energy costs of £297m and other costs of £190m.

CEO Miles Roberts commented: “It has been another year of volatile trading conditions where we have worked through the tail-end of the pandemic and, more recently, the tragic events of the Russian invasion of Ukraine.

“We have delivered strong operational, environmental and financial results. The actions we have taken, driven by our strategic focus on our customers and their changing needs, including an ever-increasing focus on sustainability, have resulted in record volume growth. This, together with price increases which have offset significant cost inflation, has driven a strong improvement in profitability and high cash generation.

“The new financial year has started well, building on the momentum from the previous year. Whilst there remains considerable uncertainty about the overall economic environment, our expectations remain unchanged. Strong customer demand reinforces our confidence to invest in the business, with capital expenditure expected to further increase in the current year.

“We currently expect to see 2-4% growth in our volumes, aided by our focus on resilient end markets, a strong performance in the US and the opening of new sites in regions where demand is buoyant. This growth, combined with the benefits of ongoing pricing momentum and careful management of our cost base gives us confidence for the year ahead and is expected to result in a further substantial improvement in our performance.”

On the markets this morning, the FTSE is up another 1.5% to 7,156.5pts following yesterday’s rebound.

Risers include PZ Cussons, up 2.5% to 197.2p, DS Smith, up 2.1% to 288.1p, and Greggs, up 1.6% to 1,972p.

Fallers so far, as well as Ocado, include Bakkavor, down 2.1% to 92p, Glanbia, down 1.4% to €10.46 and Associated British Foods, down 1.1% to 1,629.5p.

Yesterday in the City

The FTSE 100 started the week on the front foot after recent falls, closing yesterday up 1.5% at 7,121.8pts.

Ocado was up 5.6% to 877.6p before it announced a discounted share placing after the close of trading.

Associated British Foods closed up 2.4% to 1,647p after third quarter revenues jumped 32% as all Primark stores reopened following the ending of lockdown restrictions and it took price action to recover input cost inflation in its grocery and ingredients divisions.

Other risers included Glanbia, up 5.5% to €10.61, Just Eat Takeaway.com, up 4.2% to 1,530.6p, Hotel Chocolat, up 3.5% to 295p, WH Smith, up 3.2% to 1,536.5p, SSP Group, up 2.8% to 240p, Marks & Spencer, up 2.6% to 141.8p and Hilton Food Group, up 2.5% to 1,064p.

The day’s fallers included PayPoint, down 5% to 570p, THG, down 3.5% to 73.2p, Kerry Group, down 1.9% to €88.98, Deliveroo, down 1.9% to 84.9p, Coca-Cola HBC, dwn 1.3% to 1,806.5p and Premier Foods, down 1% to 117.2p.

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