Supermarkets may be victim of 'anti-corporatism' as sales slow

Graham Ruddick,
11 Feb 2014
The Telegraph UK
Sales at “big four” grocers slow as Aldi, Lidl and Waitrose grab market share
The “big four” supermarket chains, Tesco, Asda, Sainsbury’s and Morrisons, are under pressure from discounters and upmarket grocers
Britain’s leading supermarkets could be the victim of “anti-corporatism” as British shoppers switch to discount retailers and Waitrose at a rapid rate, a City analyst has warned.
New data published by Kantar Worldpanel on Tuesday showed that grocery sales in the UK grew at the slowest rate for nine years over the last 12 weeks – with Tesco, Morrisons and Asda bearing the brunt of the slowdown.
Data for just the last four weeks, which has been seen by The Telegraph, shows that the “big four” grocers, which also include Sainsbury’s, have endured even tougher trading since Christmas.
Tesco sales fell by 0.8pc in the four weeks to February 2, while Asda fell 0.7pc and the Co-operative 1pc. Sainsbury’s sales grew by just 0.1pc, compared to 6.7pc in the previous four weeks.
However, the worst performer was Morrisons, which fell by 4pc during the four weeks.
Clive Black, analyst at Shore Capital, described the Yorkshire-based supermarket’s performance as a “major cause for concern” and said it could lead to a profits warning.
Mr Black also warned that the sales data highlighted “the question of anti-corporatism towards the major players”.
He added: “Is this collective weakness because of an antipathy to large stores that predominate amongst the ‘big four’, is it about their propositions, promotions and prices, or is there a growing collective distrust and disconnection with the dominant brands that is leading folk elsewhere?
“From this data-set we are most concerned about Morrison’s position, albeit we are mildly worried about the trading momentum of Tesco UK too and so the robustness of our forecasts.”
Shares in Sainsbury’s fell by 2pc on the back of the data as investors fretted that the company’s run of 36 consecutive quarters of like-for-like sales growth could be about to end. Tesco shares fell by 1.5pc while Morrisons, which in January reported a 5.6pc drop in like-for-like sales during the Christmas period, declined 1.3pc.
In contrast to the slowdown at the largest retailers, Waitrose grew by 5.8pc during the four weeks, while Aldi surged by 37.9pc and Lidl 16.4pc. The best performer was Farm Foods, which increased sales 41pc.
Fraser McKevitt, retail analyst at Kantar Worldpanel, said: “Double digit growth helped Aldi and Lidl to gain market share, as shopper habits evolve from using the so called ‘discounters’ to pick up a few items in between shops to them being considered an acceptable place for the weekly shopping trip.”
However, Mr McKevitt warned that the “brighter economic prospects are yet to be seen in the nation’s shopping trolleys”.
Overall grocery sales grew 2.4pc in the last 12 weeks, the lowest increase since 2005.
This was partly due to food inflation dropping to 2.1pc, the slowest for four years. An increase in food prices over the last four years has helped to mask a decline in volumes in Britain’s supermarkets, but that cushion may now be disappearing.
Mr McKevitt said: “The slowest industry growth since 2005 made it hard for many of the biggest retailers to increase sales. However, shoppers felt the benefit as grocery inflation fell to only 2.1pc.”
Although food sales are falling, non-food retailers are enjoyed a pick-up in sales as the housing market recovers.
According to data from the British Retail Consortium, retail sales in the UK grew by 3.9pc on a like-for-like basis in January, the best performance for almost four years.
This increase included a fall in food sales as shoppers switched spending from groceries to furniture and household items.
Niamh McSherry, retail analyst at Deutsche Bank, said: “While UK consumer spending may have picked up in other areas, this is not feeding through to food retail due largely to slowing inflation. Food and beverage CPI slowed from an average 3.7pc in the three months pre-Christmas to 1.9pc in December.”
Ms McSherry said there is an “increasing possibility” that one of the “big four” supermarkets will launch a price war and “pro-actively invest in margin to re-establish positive sales momentum”.