UK supermarkets have enjoyed a strong summer but there is uncertainty ahead, according to Shore Capital.
Analysts at the bank noted data by NielsenIQ, the consumer and markets research house, which showed that UK supermarket sales in the four weeks to 13 August were up 4.5%.
Much of this was driven by the warm weather, with “sales of all matters ice” doing well, including cubes, ice cream and frozen goods.
Marks and Spencer Group PLC (LSE:MKS) was one of the better performers in the sector, recording the second highest sales momentum in the 12 weeks to 13 August at 7.3%, behind Asda, but ahead of direct competitors Waitrose.
Tesco and J Sainsbury PLC (LSE:SBRY) also recorded “robust” sales growth at 3.2% and 2.8% respectively over the quarter, with the pair “no doubt benefiting from their convenience estates.”
However, online shopping continued to ease, down 0.2% to 11.3% for the sector, with Shore Capital noting such “shopping missions may be vulnerable to any notable squeeze in household expenditure.”
Additionally, while the data from Nielsen shows what has been a strong summer of trading, analysts at the investment group believe Autumn and Winter's trading has a murkier outlook.
OFGEM’s recent energy price cap update is an understandable concern for households, the broker said, who are already looking at ways to cut back on costs.
A lack of government support to households means in times like this, an increasing number of UK household expenditure will be spent on essentials, such as food and energy.
While the current economic environment provides some uncertainty, the non-discretionary nature of groceries means the sector “will retain resilient economic characteristics,” although this is assuming some effective government intervention, Shore Capital said.