Sainsbury’s outperforms rivals in flat grocery market

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Grocery sales flatlined in the 12 weeks to 11 August 2019 as the tough comparisons with 2018’s strong summer continue to hamper food and drink sales growth.

The latest market share figures from Kantar show this summer’s comparatively poor weather, combined with low levels of like-for-like price rises, continue to make growth hard to find for retailers.

Notably, Sainsbury’s (SBRY) was the strongest of the big four for the first time since November 2017 as its sales declined by just 0.6% over the 12-week period.

It bucked the market-wide own-label trend: sales of branded goods at Sainsbury’s rose by 1.5%, driven by higher levels of promotion and its price lockdown strategy.

Asda sales shrunk 1.5% and Tesco’s (TSCO) by 1.6%, although Asda’s online growth of 11% was notably strong while Tesco continued to find success with its cheapest own-label lines.

Total sales of Tesco’s value tier were £29 million higher than this time last year.

Morrisons (MRW) increased its level of promotion as its overall sales fell 2.7%. A reduction in the number of items bought per trip also contributed to this decline and its market share fell to 10.1% during the past 12 weeks.

The discounters continued to give traditional food retailers a run for their money. Lidl’s sales increased 7.7% and the discounter reached a record market share of 5.9% during the past 12 weeks.

Fraser McKevitt, Kantar’s head of retail and consumer insight, said Lidl’s raft of new store openings had helped it attract 489,000 extra shoppers.

Its campaign to encourage people to do their main weekly shop at its stores was making an impact and the average basket spend was now nearly £19 – 3% higher than last year, though still significantly lower than the £22.65 average spend at the big four.

While best known for its own-label products, branded lines at Lidl grew by 19% this period and now accounted for 13% of the discounter’s sales with a strong presence for alcohol, toiletries, household products and soft drinks, said McKevitt.

Elsewhere, sales at rival Aldi increased 6.2%, helped by sales of bakery products, up 11%, and biscuits, up 13%.

McKevitt said nearly half of all households shopped in an Aldi during the past 12 weeks, showing the extent to which the discounter had established in the UK’s retail landscape.

“This figure increases even further to 58.4% in the north of England where the retailer is most popular,” he said.

Ocado, once again, claimed the top spot as the UK’s fastest growing grocer, increasing sales by 12.6%. The online retailer and technology business increased its shopper base by 7% and encouraged its customers to spend £1.93 more each delivery.

Ocado’s share of the total grocery market stands at 1.4% and it commands 18% of all online supermarket sales.

The Co-op also managed to find growth with sales 0.2% higher compared with a year ago.

Its new high-profile £3.50 burger and beer deal, which encourages shoppers to opt for barbecue favourites despite the weather, helped bring customers into its stores more often.

At the other end of price spectrum, sales of the convenience retailer’s premium Irresistible range grew 11% driven by strong performances for crisps and snacks, cheese and fruit.

Waitrose’s market share decreased 0.1 percentage points to 4.9%.

“Free-from products were a bright spot for Waitrose and it sold 8% more items from these aisles than this time last year,” McKevitt said.

“As diets change and public awareness of food intolerances continue to grow, free-from products account for a greater proportion of sales at Waitrose than at any other retailer.”

Iceland’s market share held steady at 2.1%, with sales down by 0.4% during the past 12 weeks.

Grocery inflation now stands at 0.9% for the 12-week period ending 11 August 2019. Prices have been rising since the 12 weeks to 1 January 2017, following a period of grocery price deflation which ran for 30 consecutive periods from September 2014 to December 2016.

McKevitt said: “The memory of last year still looms large for retailers and this summer’s comparatively poor weather, combined with low levels of like-for-like price rises, have made growth hard to find for retailers.

“July’s hottest day on record wasn’t enough to shift the market into growth, but the grocers will have been encouraged by glimpses of better weather during the past four weeks which helped boost sales of summer staples like hay fever remedies, sun care and burgers by 17%, 8% and 5% respectively.”

Nielsen paints a slightly brighter picture: it’s data shows total supermarket sales have started to recover – up 1% in the past four weeks, following a disappointing spring and early summer performance in which sales declined, falling 0.5% in July.

However, this growth had still failed to reach the heights of summer 2018, in which grocery sales experienced a 4.2% uplift during the same period last year, it noted.

Nielsen data also reveals that shoppers had spent £85m more on own label products in the past four weeks than this time last year, with volumes up 3% - compared with branded products, which declined 2%.

Mike Watkins, Nielsen’s UK head of retailer and business insight, said: “We’re starting to see shopping behaviour return to normal with the increase in own label purchasing given their lower price points, whereas last year shoppers bought more branded products thanks to heavy promotions tied to the big event of summer 2018.”

Sainsbury’s experienced a 1.3% lift in sales in the past four weeks and was the only supermarket in the big four to attract new shoppers, helped by their accelerated efforts around targeted vouchering.

Marks & Spencer (MKS) also fared well during the past four weeks, experiencing an uplift of 1.4% with shoppers visiting more often, and this was supported by its new ‘Fresh Market Specials’ campaign.

These uplifts were in stark contrast to the trend over the past 12 weeks, when discounters continued to show strong sales growth, with Lidl experiencing a 12.1% uplift, while Aldi rose 9.5%. Sales continued to decline at every other major supermarket, except Iceland.

“It is promising to see that the grocery market has started to recover from the low growth which has been a consistent theme since Easter,” said Watkins.

These trends have largely been obfuscated by the weather and current value growth is still not in line with inflation, which the latest Consumer Price Index pegged at 2.1%. As a whole, the big four supermarkets are still continuing to lose market share.”

Morning update

Magnit (MGNT) has announced 10.5% revenue growth and adjusted EBITDA margins of 6.9% in the first half of 2019.

Total revenue climbed form RUB595.3bn in the first half of 2018 to RUB657bn.

Like-for-like sales growth improved to 1.1% on 4.1% average ticket growth and a 2.9% traffic decline.

The company opened 1,536 stores net – comprising 804 convenience outlets, 733 drug stores and closed 1 supermarket.

This compared with 612 store in the first half of last year – comprising 378 convenience stores, six supermarkets and 228 drugstores.

Magnit was operating 19,884 shops as of 30 June.

The group added 511,000 5.5m sq ft, representing 16.7% selling space growth year on year compared with 2.1m sq ft during the same period in 2018..

Gross profit in the first half stood at RUB155.6bn with margin of 23.7%. Net income decreased by 44.8% year on year to RUB9.8bn.

Robinson (RBN) has appointed Dr Helene Roberts as chief executive to replace Martin McGee. She will join the custom manufacturer of plastic and paperboard packaging on 4 November when McGee steps down from the board.

She began her career with Marks and Spencer, initially as a materials technologist based in Hong Kong before spending seven years as food and drink head of packaging.

She is currently a managing director at Klockner Pentaplast, responsible for the UK, Ireland and Australian business.

On the markets this morning, the FTSE 100 continued yesterday’s push upwards, rising 0.4% in early trading to 7.215.5pts.

Early risers include Ocado Group (OCDO), up 2.2% to 1,230p, Devro (DVO), up 2.1% to 190.9p, Sainsbury’s (SBRY), up 2% to 192.1p and Cranswick (CWK), up 1.9% to 2.626p.

Fallers so far today include Applegreen (APGN), down 1.9% to 456.4p, Science in Sport (SIS), of 0.9% at 56p, Fevertree Drinks (FEVR), down 0.8% to 2,205p and Greggs (GRG), down 0.4% to 2,014p.

Yesterday in the City

The FTSE 100 closed up 1% yesterday at 7,189.7pts.

FTSE 100 fallers included Nichols (NICL), down 1% at 1,750p, Naked Wines (WINE), off 0.6% at 2654p, Premier Foods (PFD), down 0.3% at 32.5p and PZ Cussons (PZC), down 0.3% to 202p.

Stocks on the up included Greene King (GNK), up a whopping 51% to 850p after the announcement of its agreement to a £2.7bn takeover by CK Hutchinson subsidiary CK Bidco. Marston’s (MARS) soared leapt to 115p, as it hung onto Greene King’s stock market coat tails.

Ocado (OCDO) closed up 4.6% at 1,204p, McColls’ Retail Group (MCLS), up 3.7% at 52.7p, DS Smith (SMD) rose 3.5% to 324.8p, Fevertree Drinks (FEVR), moved up 3.4% at 2,222p and Sainsbury (SBRY), climbed 3.2% to 188.4% against the backdrop of speculation about chief executive Mike Coupe’s future – which the company adamantly denied.