Despite William Morrison Supermarkets PLC (LON:MRW) today reporting its strongest Christmas trading for seven years, it is Tesco PLC (LON:TSCO) which recorded the fastest sales growth sales of the UK ‘Big Four’ players in the last quarter according to industry data.
Market research group Kantar Worldpanel said Tesco’s sales grew by 1.3% over the 12 weeks to January 1, outperforming Morrisons’ 1.2% growth, while J Sainsbury plc (LON:SBRY) saw its sales fall 0.1%, and Asda – owned by US retail giant Wal-Mart Inc (NYSE:WMRT) – recorded a 2.4% decline.
Kantar said Tesco’s advance came as food price inflation returned after more than two years of falling costs, with its data showing underlying grocery prices rose by 0.2 percentage points during the period, the first increase since 2014.
READ: Morrison's strong Christmas ...
The research group said increases in prices for items such as fish and butter was only partly offset by falling prices for eggs and bacon.
Britain's overall inflation rate has begun to rise following the slump in the value of the pound caused by the Brexit vote last June, and it is expected to hit around 3% this year.
Fraser McKevitt, head of retail and consumer insight at Kantar said: “The long-anticipated return to inflation suggests that the speed of growth in the overall market will continue to hasten in 2017, and both consumers and retailers will be looking at ways to avoid increasing the cost of the weekly shop."
He added: "Last year retailers focused on simplifying their discounts and offers, and the level of promotional sales has fallen to 37% as a result - the lowest level over Christmas since 2009."
The Kantar report showed that total supermarket sales in the period grew by 1.8% to £27.8bn, the fastest growth rate since June 2014, helped by bumper festive spending as consumers made the most of Christmas Eve falling on a Saturday.
BRC food boost ...
Strong December food sales were also evident in a British Retail Consortium survey, released overnight, which said a buoyant Christmas week boosted overall spending growth in the month to a year-on-year rate of 1.7%, up from 1.3% in November.
The BRC report said, over the three-months to December, food sales increased by 1.1% on a like-for-like basis and were up 2.4% on a total basis, well ahead of the 12-month total average growth of 1.0%.
BRC chief executive, Helen Dickenson, said: “Food sales were the major contributor to total growth, while non-food sales on the other hand were sluggish overall, despite a strong performance by categories driven by gifting items.”
The industry data was published after Morrisons, Britain's No. 4 supermarket group, raised its current year profit guidance after seeing its strongest underlying Christmas sales since 2009.
Building on a year of growth under a new management team, the Yorkshire-based grocer also said it now expects its 2016-17 underlying pretax to be in the range £330-340mln, ahead of consensus forecasts.
Updates to come ...
Morrisons is the first of the big food retail players to report Christmas trading, with number one supermarket group Tesco due to provide its update on Thursday, and the second biggest player Sainsbury scheduled to report tomorrow.
The UK’s big supermarket groups are currently locked in the midst of a price war to combat the advance of the German-owned discount chains, Aldi and Lidl.
Aldi reported its own Christmas trading news yesterday, saying sales at its UK business rose over 15% in December compared to the same month in 2015.
Tesco shares bounced higher today in tandem with the Morrisons news, adding 3.5% or 7.0p at 208.00p, while Sainsbury's shares gained 1.6%, or 4.1p at 258.9p, and Morrisons rose 3.8% or 9.1p to 246.5p in early morning trading.