Supermarkets endured their worst sales performance in at least two years in the month following the Brexit vote but analysts are blaming poor weather rather than fears about life outside the EU.
Analysts at Kantar Worldpanel said the grocery market had declined by 1.1% in the four weeks to 17 July, which City analysts said was the worst month of trading for at least four years if periods affected by the timing of Easter were excluded.
“The weather is having a big impact on the industry at the moment, adding further pressure on sales from deflation and responding to the growth of discounters,” said Mike Watkins, UK head of retailer and business insight at analyst Nielsen.
Nielsen’s latest data – which is based on a slightly different methodology to Kantar – indicated the value of sales fell 2.4% in the four weeks to 16 July compared with the same period a year earlier. That represents the worst figure since the July 2014, if periods affected by the timing of Easter are excluded.
But Richard Clarke, a retail analyst at City broker Bernstein, cautioned: “Don’t pin this all on Brexit. July 2015 saw 35-degree temperatures, whereas this year brought rain and wind with the good weather only coming more recently.”
Fraser McKevitt, head of retail and consumer insight at Kantar, said there had been no immediate impact from Brexit on the prices retailers were charging or the volume of goods people were buying.
“The nation’s average shopping basket is 1.4% cheaper than a year ago, exactly the same level of deflation as reported last month, and it remains to be seen if the Brexit vote will bring about any price rises this year,” McKevitt said.
Analysts expect the price of food and drink to rise in the autumn when UK harvests drop off and more goods have to be imported from abroad. The falling value of the pound, making food imports more expensive, will put pressure on retailers to increase prices despite heavy competition.
McKevitt said that over the three months to 17 July, beer sales had been lifted during the early days of the Euro 2016 football tournament but then gone into rapid reversal after England’s early exit.
Beer and lager were also hindered by poor early summer weather, as were barbecue favourites such as sausages, which fell by 6.3%.
The UK’s four largest supermarket chains – Tesco, Sainsbury’s, Asda and Morrisons – continued to see sales fall and market share decline. Asda was the worst-performing chain with sales down 5.6%, taking its market share to 15.5%. Tesco put on the best performance of the majors with sales down 0.7% – its best performance since March last year – taking its share to 28.3%.
The big four are suffering from increased competition from discounters Aldi and Lidl as well as growth at upmarket chain Waitrose and the Co-op’s small local stores.
Lidl was the fastest-growing chain in the UK with sales up 12.5% in the three months to 17 July taking its market share to 4.5%, while Aldi’s sales rose 11% taking its share to 6.2%.
The mid-July heatwave is likely to have helped kickstart sales in recent weeks as families sparked up barbecues and enjoyed picnics in the sunshine.
On Tuesday, Waitrose said it had seen a 7.2% rise in sales in the week to 23 July; its customers bought 74% more ice cream and 166% more children’s lollies. Sales of Pimm’s grew by 63% and sparkling wine by 93%.
But sister chain John Lewis said sales fell by 4.3% in the week as Brits chose to make the most of the summer weather rather than shop for clothes and homewares.
