Grocers feel festive pinch as discounters win out

Tesco has reported its best Christmas in a decade as rival retailers including Sainsbury’s battled to keep market share in the face of the mounting popularity of discount grocers Aldi and Lidl.

Tesco said like-for-like sales in the six weeks to the holiday period were up 2.2 per cent, its best performance since Christmas 2009, placing it ahead of industry expectations. The “strong” performance was driven in part by a 6.7 per cent rise in sales at wholesaler Booker, bought by Tesco last year.

However, Christmas trading results brought no such cheer to Sainsbury’s, which reported overall sales down 1.1 per cent on a like-for-like basis for the 15 weeks to 5 January, driven by a 2.3 per cent slump in sales in non-food household goods, mainly at Argos, which was bought in April 2016.

Grocery sales were up 0.4 per cent, bolstered by a six per cent jump in online food sales.

Mike Coupe, group chief executive, attributed the sluggish performance to “cautious” consumer spending and a decision taken to reduce promotional activity Black Friday.

Sales at Asda, which has agreed to a merger with Sainsbury's subject to CMA approval, rose 0.7 per cent in the 12 weeks to Dec 30.

Sales were also relatively flat at Waitrose during the seven weeks to Christmas, with growth of 0.3 per cent on like-for-like sales to £1.04 million. Online saw the strongest growth at 12.8 per cent over the Christmas period.

However, the picture was brighter for Waitrose owner the John Lewis Partnership, which celebrated an overall rise in sales of 1.4 per cent for the seven weeks to 5 January at £2.2 million.

Despite this performance, John Lewis chairman Charlie Mayfield said “current pressures in retail” will mean the board will need to “consider carefully” in March whether payment of next year’s annual bonus to staff is “prudent”.

But it is the smaller and discounter retailers which have really felt the benefit of shoppers in search of a bargain in the run up to Christmas. New figures showed that two thirds of all UK households visited either Aldi or Lidl over the 12 week period to Christmas, taking their combined market share to 12.8 per cent, up from 11.4 per cent in 2017.

Aldi reported sales up by 10.4 per cent in December, delivering its best Christmas on record with almost £1 billion in total sales.

Chief executive Giles Hurley said it saw particularly strong sales in its Specially Selected premium lines “where shoppers treated themselves to premium products for a fraction of the price they would have paid elsewhere for similar quality products”.

Fellow discounter Lidl also benefitted from the shift in middle class shopping habits, with sales up 9.4 per cent.

Morrisons, the UK’s fourth biggest supermarket, reported a 0.6 per cent rise in retail sales (down from the 2.1 pc growth in 2017) and a jump of 3.6 per cent in like-for-like sales excluding fuel, driven by a three per cent uptick in wholesale, including partnerships with Amazon and convenience chain McColl’s.

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