UK grocery Christmas results

Last week saw industry analysts pore over sales results for the UK’s largest retailers in what has become an annual ritual. The headlines focus on “like-for-like” (LFL) sales growth and who is up or down on the same period last year. History is quickly forgotten; but stitch together results from a few years in a row and the true pressure on UK grocery retail (and who has been winning long term) becomes clearer.

For UK grocers, this year’s Christmas results are a mixed bag. Tesco tops most commentators’ lists as the winner, and with LFL growth of 2.2% were some way ahead of their rivals. Morrisons and Waitrose at least managed a small rise in LFL sales, although strip out the growth from wholesale sales at Morrisons and their retail LFL growth of 0.6% was more modest (down on H1 2018 results).

Sainsbury’s and M&S didn’t even manage that and both saw sales fall. For Sainsbury’s, small gains in grocery sales were undone by a drop in general merchandise and clothing, while M&S saw food sales slip 2.1%. Even at Aldi, where the headlines said 10% year-on-year growth, much of their outperformance relies on a new store opening programme. Many of their existing stores are probably not much better off this year than last.

Grocery is a mature sector and no-one expects stellar growth rates. But the flat sales revenues have to pay for many costs that rise year on year:

• for property – business rates are on an automatic upward track;
• for staff costs – another living wage increase is due later this year;
• for cost of goods sold – commodity prices and food inflation are still flowing through, even before Brexit.

Meanwhile, consumers continue to shift slowly but steadily towards higher service (and higher cost) convenience and online channels.

The long road to recovery

Look at the history and the pressure is even clearer. In many ways, this was a decent Christmas for UK grocers. Tesco’s sales performance was widely reported to be its best at Christmas since 2009. Bring together several years’ worth of performance and you can see why.