Winners and losers in the supermarkets' battle for Christmas
Morrisons' better than expected performance came despite another tough Christmas for UK supermarkets.
Grocers faced their seventeenth consecutive period of deflation, with inflation at minus 1.8 per cent in the 12 weeks to January 3, according to the latest Kantar Worldpanel data.
While this means shoppers paid less for their festive fare, grocers are struggling.
The data showed deflation in major festive categories such as ice cream, poultry and cheese as well as store cupboard staples such as eggs, butter and crisps.
Morrisons’ sales fell 2.6 per cent, although its performance was hit by store closures and a move away from loyalty cash promotions.
Leeds-based Asda was the worst performing of the big four supermarkets over Christmas with sales down 3.5 per cent as shoppers decamped to cheaper rivals Aldi and Lidl. Asda’s point of difference has always been its promise to be 10 per cent cheaper than its rivals, but this has been eroded by the discounters’ “pile it high and sell it cheap” ethos.
Asda is hoping to turn its fortunes around with the announcement of a further £500m investment in price cuts.
According to Kantar Worldpanel, Sainsbury’s was the best performer of the big four, with sales up 0.8 per cent in the 12 weeks to January 3.
The firm attracted an additional 114,000 shoppers, with its premium “Taste the Difference” brand recording its best ever Christmas.
Market leader Tesco suffered a 2.7 per cent decline.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said he doubted that Morrisons’ better than expected results will be seen across the board.
“It seems to be Morrisons’ out performance rather than the market,” he said.
“It looks like a success for Morrisons going back to basics. They’re appealing to their core shopper and focusing on their core retail estate.”
However he warned that the decision to close 21 stores and sell off the 140 M Locals will hit the bottom line.
“It’s hard to think of many businesses that grow profits by getting smaller,” he said.
“If they’re shrinking the business it’s hard to see how they will get back into the FTSE 100.”
Sainsbury’s will report its festive trading on Wednesday, Tesco updates on Thursday and Asda will not report until next month.
The big four supermarkets have been hit by a shift away from big weekly food shopping trips towards more frequent spending, particularly at discounters Aldi and Lidl.
“The discounters are continuing to establish themselves in the minds of British consumers – almost one in eight did their single biggest December shopping trip in Aldi or Lidl, on top of the 15.6 million households who visited at some point in the 12 weeks,” said Mr McKevitt.
“That is an increase of nearly one million shoppers on last year, and their combined share is up from 8.3 per cent last year to 9.7 per cent.
“Despite Aldi and Lidl’s success, consumers are still spending most of their money in more traditional supermarkets, particularly in December, and total discounter share has dipped from the 10.0 per cent achieved just before Christmas.”
Kantar Worldpanel showed overall industry sales fell by 0.2 per cent year-on-year in the 12 weeks to January 3, adding to evidence of a subdued Christmas across the retail sector as unseasonably warm weather hit demand for clothing.