Consumers spent £1bn extra on groceries this Christmas as they shrugged off concerns about the economy to increase sales by 3.8%, slightly ahead of inflation.
Aldi and Lidl were the biggest winners, both increasing sales by 16.8% in the three months to 31 December, according to the latest data from Kantar Worldpanel. They were able to attract 1 million more shoppers over the period as people tried to reduce the effect of Brexit-induced inflation by seeking out cheaper versions of everyday essentials.
The four major supermarkets – Tesco, Sainsbury’s, Asda and Morrisons – all lost market share but still increased sales, partly thanks to food price inflation of 3.7% in the 12 weeks.
They also benefited from a late rush. Shoppers parted with £747m on 22 December alone, making the Friday before Christmas the busiest groceries shopping day ever recorded, according to Kantar.
Tesco was the fastest-growing of the big four supermarkets, with sales up 3.1% during overt the 12 weeks. This was the fastest sales growth the retailer had achieved since June, helped by a 6.4% increase in sales of its standard own-label products.
Sainsbury’s was the worst performer of the big four supermarket groups, according to Kantar. The chain is set to reveal its Christmas trading performance to the City on Wednesday, followed by Tesco on Thursday.
Marks & Spencer, which is expected to update the City on its festive trading on Thursday, held market share as it increased sales by 3.6% according to separate figures released by analysis firm Nielsen.
On Tuesday, Morrisons said strong sales of premium foods, children’s clothes and bags of vegetables helped it enjoy a better-than-expected Christmas.
Sales rose by 2.8% in the 10 weeks to 7 January, well ahead of the 1.7% expected by analysts. Sales were even stronger in the last six weeks of that period, rising by 3.7%.
The UK’s fourth largest supermarket said it had fought off cost inflation to hold prices steady on a basket of 100 key Christmas items including turkey crowns and mince pies. It increased the total number of items sold as it kept overallfood price rises in its stores below the average industry rate.
Sales of Morrisons’ premium The Best range soared by 25% and it sold 8.8% more bags of Christmas vegetables with a three-for-£1 deal. Trade was also boosted by good sales of its Nutmeg range of children’s and babies’ clothes, and the expansion of its wholesale business through outlets at Rontec petrol stations and via Amazon. It also won new business in providing tobacco products to McColl’s stores that were let down by the collapse of wholesaler Palmer & Harvey in late November.
Online sales increased by 10% as Morrisons began delivering to more parts of the country with its partner Ocado. The majority of Morrisons’ online sales are delivered from Ocado’s warehouse in Dordon, Warwickshire.
“This is a good start for UK food retail,” said Bruno Monteyne, an analyst at Bernstein Research. But he said excitement should be tempered as it was not clear how much Morrisons had been helped by its recent move into selling non-food items, an area which many of its rivals have been exploiting for years.
Despite the better than expected sales, Morrisons said it did not expect to exceed current predictions of a 10% rise in profits this year to £371m, as it had invested in keeping prices competitive.
Morrisons chief executive, David Potts, said there was no obvious sign that Brexit had hit consumer sentiment but shoppers “were on the lookout for great value”. “We feel well placed to provide that and the numbers appear to confirm it,” he added.
With three consecutive years of sales growth under its belt, Potts said Morrisons would look at opening a handful of new stores, after a period of closures.
The growing wholesale business was part of the “broader, stronger Morrisons” he wanted to build. He said: “This is the start of the journey.”
Morrisons has begun supplying McColl’s with a range of own-label items under the Safeway brand, which Morrisons owns. It began deliveries to 25 stores and will add 25 more stores a week over the coming year.
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