logo-loader
viewWM Morrison Supermarkets PLC

Aldi's slower Christmas growth paints gloomy picture for Big Four

The group's UK arm had 874 UK stores trading in December, compared to 800 a year earlier

Aldi supermarket

A post-Christmas update from Aldi showed that the German discount supermarket is keeping up the pressure on its UK grocery rivals but that the festive period might have been a disappointing one for the sector overall.

Aldi’s UK arm generated more than £1bn of sales in the four weeks leading up to Christmas eve for the first time, the company said in a statement on Monday, ahead of announcements later in the week from WM Morrison Supermarkets PLC (LON:MRW), J Sainsbury PLC (LON:SBRY) and Tesco PLC (LON:TSCO).

READ: Festive trading updates dominate corporate diary in week ahead

With 874 UK stores currently trading, compared to 800 a year earlier, total sales at Aldi UK increased 7.9% in the four weeks to 24 December, with LFL sales “positive” and the festive performance put down to strong demand for beers, wine and spirits, premium products and fresh meat. 

“While a growth figure of 7.9% is something the vast majority of its grocery rivals will be unable to compete with, Aldi benefitted from a 5-6% expansion in store numbers throughout the year, suggesting a LFL sales increase for the period hovering somewhere around the 3% mark, a much more digestible benchmark for the likes of Tesco and Morrisons to aim for,” said retail analyst Thomas Brereton at GlobalData.

December supermarket industry data showed that Aldi had a UK market share of 8%, behind fellow German limited-assortment retailer Lidl’s 9.3% share.

The rise of the German LADs has been the largest part of a drop in the market share of the ‘big four’ of Tesco, Sainsbury’s, Morrisons and Asda, to 67.7% from 69.1% over the past year.

Competition from Aldi and Lidl has prompted the big four work harder to improve their sales and reduce costs, with Tesco and Morrisons expanding into wholesale supply, a route Sainsbury’s has recently taken after failing in its attempt to merge with Asda.

However, analysts suggested that 

GlobalData's Brereton noted that Aldi avoids releasing comparable data across its Christmas periods each year, “implying the results they do release are the most endearing – and suggesting that this 7.9% growth is likely a brighter version of its overall Christmas performance”.

“So, while Aldi’s focus in 2020/21 appears to be on expanding its underrepresented presence in London – largely through its Local fascia – Aldi must now face the fact that it can no longer hope to achieve the same domineering double-digit growth it has done over the past decade.”

It was a “disappointing” update from Aldi, reckoned Neil Wilson at Markets.com, with sales growth below the 11% rate in 2018 and the 10% in the same period of that year.

“Whilst we should always take numbers from private companies with a pinch of salt, the performance does not suggest that the big 4 listed supermarkets experienced a tremendous festive bounce.” 

He added: “Investors are braced for a lacklustre Christmas for the big four listed supermarkets, but this points to arguably a bigger slowdown than had been expected.

“If even the discounters are seeing growth rates decline, we should expect similar for the larger names – it is hard to imagine they are picking up market share back from the Germans.

“Moreover, if Aldi’s growth slipped despite 47 more stores operating at the end of 2019 versus the start of the year, we should expect a poor Christmas performance across the piece.”

Quick facts: WM Morrison Supermarkets PLC

Price: 192 GBX

LSE:MRW
Market: LSE
Market Cap: £4.62 billion
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

CentralNic boss says first half revenue has already beaten full 2019 numbers

CentralNic Group PLC (LON:CNIC) CEO Ben Crawford is thrilled with first half revenue for 2020 – enjoying their best ever trading period. The company’s first-half revenues of more than US$110mln were up from US$49.7mln in the same period of 2019. Its earnings were more than US$15mln compared with...

13 hours, 20 minutes ago

3 min read