Morrisons was the big loser as Britain’s major food retailers endured their worst Christmas since 2014, hurt by intense competition and sustained consumer uncertainty which deterred shoppers from splashing out.
Industry data from market researchers Nielsen and Kantar showed all of Britain's big four supermarket groups – market leader Tesco, Sainsbury's, Walmart owned Asda and Morrisons – suffered sales declines in the 12 weeks to the end of December and continued to lose market share to German-owned discounters Aldi and Lidl.
Both data sets showed Morrisons was the industry laggard and the firm’s own trading statement confirmed a weak performance.
Nielsen said British supermarkets’ total sales over the four weeks to December 28th period rose just 0.5 per cent from last year – the lowest sales growth over the Christmas period in five years.
It said while shoppers visited supermarkets more often, they purchased fewer items and spent less each time.
“There was no sign of the post-election rush many had hoped for in the final weeks before Christmas, with shoppers carefully watching their budgets,” said Fraser McKevitt, head of retail and consumer insight at Kantar.
He said consumers cut back on traditional and indulgent festive classics, with sales of Christmas puddings down 16 per cent, sparkling wine sales down 8 per cent and turkey sales down 1 per cent.
Morrisons’ own update showed its underlying sales, excluding fuel and sales tax, fell 1.7 per cent in the 22 weeks to January 5th – a period that included the group’s third quarter and the nine-week Christmas trading period.
“Throughout (the period), trading conditions remained challenging and the customer uncertainty of the last year persisted,” chief executive David Potts told reporters.
“The market was also highly promotional (and) collectively more competitive, especially in areas such as beers, wines and spirits, fuel and in-store coupons,” he said.
UK pay growth has slowed since the middle of 2019 – a year characterised by political uncertainty in the run-up to several Brexit deadlines and the December 12th national election.
Potts said there would be uncertainty in the grocery market until the terms of Britain's exit from the European Union become clearer.
Morrisons’ performance was, however, better than feared, with analysts forecasting a decline of 2.2 per cent from the year earlier period.
The firm said it still expected 2019-20 pretax profit within the range of analysts’ forecasts of £400-431 million ($527-$568 million), up from £396 million in 2018-19, thanks to the tight management of costs.
The run up to Christmas marks the most important, and competitive, time of the year for British supermarkets.
In recent years all four major groups have had to fight off the challenge from Aldi and Lidl, which are continuing to open new stores at a rapid pace. The discounters are also selling more premium products, making them more competitive over Christmas.
Kantar noted that Aldi and Lidl’s combined market share of 13.7 per cent is more than treble what they held in December 2009.
On Monday Aldi UK reported a 7.9 per cent increase in total sales for the four weeks to December 24th and said its like-for-like sales were positive.
The Nielsen and Kantar data showed Sainsbury’s as the least worst performer, followed by Tesco and Asda. Online seller Ocado maintained its position as Britain’s fastest growing grocer with sales growth of 12.5 per cent, Kantar said.
Sainsbury’s, which is trying to rebuild confidence in its strategy following a botched attempt to take over Asda, updates on trading on Wednesday, followed by Tesco and Marks & Spencer on Thursday. – Reuters
