UK supermarket sales slowed sharply in May as cooler spring weather and weak consumer confidence weighed on demand, with broker Shore Capital expecting the sector to face difficult trading conditions through the summer.
Retail analyst Clive Black said shoppers remained in a “subdued mood” amid concerns over rising energy bills, higher food prices and broader economic uncertainty.
Data from NIQ showed grocery sales rose 4.2% by value in the four weeks to 16 May, although Black said the figure was distorted by one particularly strong trading week linked to Easter timing effects.
Underlying sales growth, excluding that week, was just 0.2%, implying falling sales volumes once inflation is taken into account.
Ocado Retail, Marks and Spencer Group PLC (LSE:MKS) and Lidl were the strongest performers over 12 weeks, while growth at Tesco PLC (LSE:TSCO) “dipped a little” and J Sainsbury PLC (LSE:SBRY) modestly outperformed the wider market.
Aldi’s sales were flat and Asda remained under pressure, with sales down 4.7%.
Black said shoppers appeared to be becoming more cautious, pointing to stronger demand for ambient and frozen foods and weaker sales of beer, wine and spirits.
Black said retailers were likely to face difficult trading conditions through the summer.
“The outlook, with essentials inflation rising, and maybe Bank of England base rates increases in H2, is tough and toughening for the UK discretionary sectors.”
However, warmer weather and the start of the FIFA World Cup next month could provide a temporary lift to demand for barbecue foods and drinks.
“We sense that the retailers are alive to the concerns of shoppers around essentials inflation,” he said.
“Much is hoped from the FIFA World Cup, where we hope both England and Scotland excel.”
He also felt that grocers and their supply chains are “more resilient", also noting ongoing productivity programmes, strong finances, including good cash generation.