Deutsche Bank has cut its target prices for FTSE 100 supermarkets J Sainsbury PLC (LON:SBRY) and WM Morrison Supermarkets PLC (LON:MRW) to 275p from 300p and to 255p from 260p respectively amid a slowdown in consumption into the Christmas period.
The German bank said data from research body Kantar had reported a “significant slowing consumption trend in the four weeks up to 2 December”, pressured by a slowdown in inflation and falling consumer confidence.
READ: 'Big Four' grocers continue to lose market share to Aldi and Lidl; Morrisons rises on Amazon bid talk
“With inflation slowing at +1.6%, grocery market growth of 1.8% on a 12-week basis implies volume growth of close to 0%. Grocery market growth has been gradually slowing from its +3.9% peak in July as a result of slowing inflation, cooler weather and falling consumer confidence due to an uncertain political climate” analysts said, adding that the so called ‘Big 4’ supermarkets comprising Sainsbury’s, Morrisons, Tesco PLC (LON:TSCO), and Asda had underperformed the market in the four weeks to 2 December by around 140 basis points.
“Given the softening trend in the market, Big 4 sales growth slowed from 0.8% [year-on-year] to -0.3%. Sainsbury had the strongest performance among the Big 4 for the first time since August, benefitting from easier comps. The other three of the Big 4 had roughly similar performance at -0.4/0.5% in the period.”
There was also glum news for the major supermarkets yesterday as data from Kantar Worldpanel revealed German discounters Aldi and Lidl were continuing to chip away at their market share over the last 12 weeks.
Tesco’s market share fell to 27.6% from 28.2% the same period a year ago and sales dropped 0.1%. Sainsbury’s market share dropped to 16.0% from 16.4% last year and sales declined 0.2%. Morrisons delivered a 0.5% rise in sales but its market share fell to 10.5% from 10.6% the previous year.
The only one to maintain market share was Asda at 15% with a 1.5% rise in sales, while Aldi sales gained 12.2% and its market share rose to 7.6% from 6.9% and Lidl’s sales rose 11.2% and its market share increased to 5.6% from 5.1%.
Competition from Aldi and Lidl has prompted the Big Four supermarkets to implement measures to improve their sales performance and reduce costs with Tesco and Morrisons expanding into wholesale supply and Sainsbury’s agreeing to buy Asda.
In early afternoon trading Wednesday, Sainsbury’s shares were down 4.9% at 281.8p while Morrison’s shares were down 0.7% at 224.8p.