Shares in Sainsbury’s (SBRY), Tesco (TSCO) and Ocado (OCDO) were up 1%, 0.9% and 6% respectively as data from market research outfit Kantar revealed bumper Christmas for the supermarket sector with £11.7 billion worth of sales in December.
Online groceries specialist Ocado’s joint venture partner Marks & Spencer (MKS) was also in demand, rising 3% to 245.7p, as Ocado was shown to be the only operator tracked by Kantar to beat its festive performance in 2020, sales up 2.5% year-on-year in the 12 weeks to 26 December.
The peer group saw sales step back modestly from the record levels seen in 2020 but Tesco was the other winner as it grew its market share and every major grocer increased sales compared with the final 12 weeks of 2019.
Tesco’s share of the market was up by 0.6% to 27.9%, the highest since January 2018. Aldi, Lidl and Waitrose also grew their shares by 0.3%, 0.2% and 0.1% respectively.
Second-largest grocer Sainsbury’s now holds 15.7% of the market, Asda comes in at 14.2% and Morrisons on 10.1%.It seems that people either isolating due to having Covid or those avoiding pubs, bars and restaurants to avoid having their Christmas disrupted by a positive test turned to the supermarkets instead as they entertained at home with strong sales of items like sparkling wine and crisps.
LOOKING AHEAD
Shore Capital analyst Clive Black looked ahead to what 2022 might hold for the groceries space. ‘The UK supermarkets commence 2022 in the midst of ongoing pandemic constraints, that is leading to absenteeism, working from home and so watered down consistency with lockdown 1.0 of spring 2020.
‘Coronavirus and UK-EU policy are key drivers behind a spike in inflation that is clearly beyond transitory. Current trade, especially on a two-year basis is strong, but we need to understand COGS (cost of goods sold) and operating expenses before being more confident about near-term supermarket earnings.
‘That said, we are still cautiously optimistic, and whilst UK food inflation can be expected to rise further, we do see in the absence of new pressures an easing in H2 (note manageable inflation is a good thing for sector earnings).’
Black added that while ‘competitive’ the trading backdrop is also ‘rational’ as the German discount chains Aldi and Lidl become more mature and he noted that profitability on online sales should also improve, with a winter World Cup potentially providing a boost if England perform well.
