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Market Commentary

​​Weekly Retail & Leisure News - 12 January, 2015

Christmas Trading: Winners in supermarket sector revealed

Tesco and Sainsbury’s have both announced Christmas trading results this week. Tesco LFLs were down just 0.3% in the 6 weeks to January 3, however total sales were up 1.2%. Tesco also announced that it will close 43 unprofitable stores, the majority being convenience stores, and that it will shelve plans to open a further 49 new ‘very large’ stores. After Tesco unveiled its promising turnaround plan, JLL UK CEO, Guy Grainger noted on CNBC, that their shares have soared. Sainsbury's LFLs fell 1.7% and total sales fell 0.4% in the 14 weeks to January 3. Even though this is their first drop in LFLs over Christmas for more than a decade, it is a better performance than many had expected. City analysts also predict that Morrisons will post negative Christmas LFLs this week.

So far Waitrose has emerged as one of the clear Christmas winners in the grocery sector after posting record festive sales. The upmarket grocer’s LFLs rose 2.8% and total sales rose 7% to £728m in the five weeks to January 3. Further evidence of strength in the premium end of the grocery market comes from M&S’s food division, where sales were up 0.1% in the 13 weeks to December 27, also ahead of the big supermarkets. Lidl has also reported its most successful Christmas in the UK, with a 20% increase in sales in its Christmas week.

Despite the competition, the ‘Big Four’, Tesco, Sainsbury’s, Morrisons and Asda, still hold 75% of the UK grocery market. Discounters, like Aldi & Lidl, only hold an 8% market share and their growth is slowing. Price is important, but we predict the winners will be those who can also provide convenience, a strong online platform, proper service and undoubted provenance. Tesco is still the UK’s largest retailer and has a grocery market share of nearly 30%. In JLL's Property Predictions 2015, we discuss how the ‘Big Four’ still have the space, brand and firepower to launch a credible fight back against the discounters.

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