At the time of writing, the only London-listed supermarket chain not to report its Christmas trading figures was Tesco (TSCO). But based on the performance of two close rivals – J Sainsbury (SBRY) and Morrisons (MRW) – we can assume the figures will reflect the widespread challenges facing UK grocers, not least the continued market share gains made by German discounters Aldi and Lidl – but also the online convenience offered by internet giants such as Amazon (US:AMZ).
Despite a fourth consecutive Christmas of sales growth, where the average price of a customer’s basket remained the same year on year, Morrisons hinted that it will cut prices across hundreds of products this year in order to maintain its market share. Like-for-like sales rose 3.6 per cent over the nine weeks ended 6 January 2019, but the group warned that the sector remains fiercely competitive. Indeed, data specialist Kantar Worldpanel estimates that two-thirds of all households shopped at either Aldi or Lidl over the 12-week period ended 30 December 2018, culminating in a highest ever combined Christmas market share of 12.8 per cent for the German disrupters.
Likewise, Sainsbury’s struggled to see off the competition, although grocery sales still managed to eke out a 0.4 per cent improvement, suggesting that a slowdown in food sales towards the year-end had minimal effect on Christmas appetites. Digging into the performance by Sainsbury’s, it seems general merchandise was the weak link, registering a 2.3 per cent decline as clothing sales fell 0.2 per cent. Bosses claim this still marked an outperformance against the wider market, but admitted that this part of the retail sector remains “very promotional” and the consumer outlook “uncertain”.
Interestingly, Sainsbury’s made no comment on its potential merger with the last of Britain’s ‘big four’ – Asda. News of the potential £7.3bn tie-up first emerged at the end of April last year and, if approved, would hand Asda’s owner, Walmart, around £2.98bn in cash and a 42 per cent stake in the combined business. The deal is currently subject to second-phase investigation by the Competition and Markets Authority (CMA), which is deliberating a consequential loss of competition if the merger were to complete.
