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Market Commentary

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 16​​​​​​​​​​​​ January, 2016​

Christmas Trading: Winners in supermarket sector revealed

This week’s Christmas trading updates continue to paint a positive picture for many retailers, particularly in the grocery sector. In the three months to the end of December, food sales increased 1.1% on a LFL basis, according to the BRC, and 2.4% on a total basis, ahead of the 12-month total average growth of 1.0%. According to Kantar World Panel, shoppers spent nearly half a billion pounds more in supermarkets in this period compared to last year, boosting grocers’ sales growth across the board.

As consumers sought out quality over the Christmas period, a number of premium grocers have reported positively. Waitrose has emerged as a clear winner, with LFLs rising 4.8%. Further evidence of the strength of the premium end of the market comes from Booths, who posted record-breaking results, with LFLs up 2.6%. In addition, LFLs rose 0.6% at M&S’s food division; while this is below certain competitors’ results, it must be noted that M&S were one of the few grocers to report positively over Christmas 2015.

Tesco, Morrisons and Sainsbury’s also all announced positive Christmas trading results as their turnaround plans seem to be taking hold. Morrisons reported its strongest Christmas performance in seven years, as LFLs rose 2.9% on the back of a continued drive to improve quality and affordability. Tesco’s LFLs increased 0.7%, as the retailer’s decision to re-focus on food paid off, after it sold a number of ancillary businesses including Giraffe, Blinkbox, Euphorium and HomePlus. And Sainsbury’s also reported positive LFLs of 0.1%, with particularly strong performance in its online and convenience divisions.

Turning to the discounters, total sales at Aldi were up 15% YoY in the month of December, and its LFLs were ‘strongly positive,’ driven in particular by its premium ranges. Total sales at rival Lidl rose 10% in December, making it the discount grocer’s most successful festive trading period ever. Elsewhere, with total sales rising 4.7% in the 12 weeks to December 31, Iceland was the fastest growing grocer behind the two discounters.

Looking forward, as highlighted in JLL’s Property Predictions, the outlook for the grocers, and the broader retail sector, remains challenging, as retailers endure a ‘perfect storm’ of rising inflation, labour costs, import costs and in some cases business rates and ongoing ecommerce–led structural change.

We look forward to bringing you a full round-up of Christmas trading results in next week’s edition.​

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