It is a big week for grocers as we await the Christmas trading statements of Morrison, Sainsbury and Tesco. According to the latest Kantar Worldpanel review of the UK grocery market there was a 2% increase in sales growth in the 12 weeks to 2 December, the weakest rate since March 2017.
The Big Three supermarkets will be looking to defend their market share will demonstrating that they provide good value to price conscious customers while still managing to boost profits. This may be difficult to achieve, given the enhanced competition from the likes of Aldi and Lidl, which between them now have a combined UK market share of 13.2%.
Morrison shares under microscope
The Big Three supermarkets have been showing continued positive momentum in like-for-like sales and will be looking to demonstrate further progress to investors over the Christmas period. Expectations are low after the grim pre-Christmas headlines from the retail sector.
Morrison shares will be the first under the microscope, as the supermarket chain reports tomorrow. It has probably the toughest base for comparison to overcome, showing like for like growth of 2.1% on the retail side for Christmas 2017. Investors will want to know how Morrison’s online relationship with Ocado is doing and what progress has been made on wholesale following the supply deal with McColl’s Retail.
Morrison shares are still down on a 30 day basis, trading at 218 at the time of writing. They started December around 237.
Sainsbury shares – focus will be on Argos trading
Sainsbury showed a 1.1% like for like sales increase last Christmas.
“Analysts will be looking for an update on trading at Argos since almost half its sales come in the fourth quarter of the year and it represents 15% of group revenues, as well as online and convenience,” says Russ Mould, investment director at AJ Bell. “At least Next and John Lewis have offered some reassurance on the clothing and non-food market. The Competition and Markets Authority is due to report shortly on the proposed Sainsbury-Asda merger.”
Sainsburys shares have also been in something of a slump in the last 30 days, down from around 300 to 265 at the time of writing. Even taking a medium term view it has not looked good for Sainsburys stock, which has dropped sharply from around 325 in November. Overall market sentiment seems very poor, despite some buying of Sainsbury shares in early trading this morning.
Tesco shares benefit from Booker approval
Finally Tesco, which showed a 1.9% increase in like for like sales in the UK, has also had a boost to its wholesales business after the Booker deal went through. Trends in online, convenience and wholesale will be closely watched by analysts and investors, as confidence in CEO Dave Lewis’ targets for Booker is looking a little shaky.
Tesco shares were trading at 201 this afternoon. Of the three supermarkets, Tesco stock seems to be holding up the most – it was still priced at about 200 a month ago. The Booker approval will have played a big part in this. On the six month picture Tesco has been disappointing, giving up a price of 260 in August, and shedding over 20% since then.
