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Food prices have risen at the fastest rate for more than 14 years, with the sector becoming the biggest contributor to UK inflation last month.
The overall UK rate eased back to 9.9% in the 12 months to August, compared with 10.1% in July, according to new figures from the Office for National Statistics (ONS).
A 14.3p per litre fall in the price of petrol helped slow inflation as dropping global oil prices fed through to the pumps, with the annual rate for fuel falling from 43.7% to 32.1% between July and August.
However, cheaper fuel was offset by continued soaring food and non-alcoholic drink prices, which rose at an annual rate of 13.1% in August, up from 12.7% in July.
It marks the highest rate since August 2008, with the biggest jumps coming from milk, eggs and cheese.
Food prices have now risen for 13 months in a row, with the 1.5% increase between July and August being the largest jump between the two months since 1995.
Alcoholic beverages and tobacco inflation remained steady at 5.4%.
BRC chief executive Helen Dickinson said: “Inflation eased very slightly this month, but at 9.9%, it remains a significant concern for households who continue to face a cost of living squeeze. Energy costs are still the biggest component of inflation, and while the latest announcement to limit the rise in the energy price cap is welcome, consumers still face higher bills in October.
“Despite the substantial cost pressures bearing down on businesses and their supply chains, retailers are trying their best to support their customers. This includes expanding value ranges, implementing price locks on key goods, and raising pay for staff.”
Morning update
Shares in Naked Wines have slumped more than 25% this morning following two unexpected updates from the online wine retailer after trading hours last night.
A business update said the group was reviewing potential operational and financial plans for the next 18 months and would give more details alongside a first-half trading update in the week of 17 Octber.
“The group’s focus is on developing plans demonstrating increased profitability, cost restraint and improved payback,” it said.
Naked added it was also in “active discussions” to address its credit facility to reflect any revised plan.
“The group remains in compliance with all obligations around this facility through Q1 and expects to have headroom to the Q2 covenant tests,” the update said.
Naked also announced separately that non-executive director Pratham Ravi had resigned from the board less than three weeks after joining.
Ravi, who is an analyst at Punch Card Capital, one of Naked’s largest shareholders, was appointed to the board on 25 August 2022.
Liberum analyst Wayne Brown expected the news to “rock the shares” and said “something has gone somewhat awry” following the departure of Ravi.
“The business update talks about cost cutting, focussing on profitability going forward which we interpret as a change in strategy and not being so aggressive on growth,” Brown added.
“This could imply a smaller business in the future and reigning in ambitions which makes sense considering how poor KPIs are. But it is the weak balance sheet, question marks around the covenants in Q1, liquidity and going concern issues and also how the group will drive liquidity in Q2, could suggest the trading update on 17 October could be rather negative.”
Shares in Naked slumped 27% to 105.9p as markets opened this morning, with the stock having now lost 82% of its value in the year to date.
Sales at drinks group C&C have returned to pre-Covid levels, but the Tennent’s and Magners maker warned the on-trade recovery slowed over the summer as consumer confidence ebbed away.
A pre-close trading update for the six months to 31 August showed a 35% jump in net revenues to about €900m, which was broadly in line with 2019 levels.
Operating profits are expected to be in the range of €52m-€55m, compared with 416m in the prior year and €64m in the first half for 2020 financial year.
C&C said trading through the first half saw demand return robustly, but the impact of inflation on discretionary consumer spending resulted in a slowdown in on-trade momentum over the second quarter.
The group will announce the results in 27 October.
Real estate investor Supermarket Income REIT has purchased a Tesco in Llanelli, South Wales, for a total purchase price of £66.8m.
The store was developed for Tesco in 1989 and occupies a 10-acre site comprising a 82,046 sq ft net sales area supermarket, a 16-pump petrol filling station and 753 car parking spaces. It is an online hub for Tesco, with 10 home delivery vans and a dedicated click & collect facility in the car park.
The store is being bought from M&G with an unexpired lease term of 12 years.
Ben Green, director of Atrato Capital, the investment adviser to Supermarket Income REIT, said: “This acquisition further strengthens SUPR’s portfolio of top trading omnichannel supermarkets. The store has strong trading fundamentals, comes at an accretive acquisition yield and is subject to annual index-linked rent reviews.”
The FTSE 100 sank another 0.8% to 7,328.97pts this morning after being driven down yesterday by worse-than-feared US inflation data.
Other than Naked Wines, early fallers included C&C Group, which was down 4.7% to 165.7p following its trading update, Glanbia, down 4.5% to €12.17, McBride, down 3% to 22.8p, and Deliveroo, down 2.6% to 89.2p.
Risers so far included Devro, up 2.7% to 186p, Hilton Food Group, up 1.7% to 983p, and Just Eat Takeaway, up 0.9% to 1,518p.
Yesterday in the City
The FTSE 100 slipped into the red in afternoon trading yesterday as higher-than-expected US inflation spooked global markets, with the blue-chip index down 1% to 7,395.40pts.
Ocado led the grocery/fmcg fallers, with shares tumbling 14.1% to a more than four-year low of 683.2p as investors worried about its shrinking order sizes following the Q3 update. It puts the stock down more than 56% in 2022 so far.
The result dragged on the shares of online partner Marks & Spencer, with shares in the retailer also down 3.6% to 122.2p.
Tesco and Sainsbury’s also fell lower on the down-beat retail sentiment as the latest Kantar data showed the discounters stealing a march on their traditional rivals, with Aldi overtaking Morrisons in terms of market share for the first time. Tesco fell 2.8% to 246p, while Sainsbury’s slipped 1.6% to 210.1p.
Primark owner Associated British Foods also fell 2.7% to 1,368.5p, B&M European Value Retail was down 2.9% to 352.8p and Greggs sank 2.2% to 1,998.8p.
Fever-Tree shareholders breathed a sigh of relief after the premium mixer business reported first-half losses in line with prior expectations. The group also stuck to guidance for the full-year, sending shares up more than 10% at one point before the stock closed the day up 4.1% to 988p.
Other risers included Hotel Chocolat Group, up 1.8% to 140p, Bakkavor, up 4.3% to 99.1p, Parsley Box, up 2.6% to 10p as it posted a reduced first-half loss, and Naked Wines, up 4.4% to 145.1p.
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