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Aldi and Lidl see quickest progress
Consumers continued to flock to low cost supermarkets.
Aldi was the quickest rising retailer in October, rising its gross sales by 22.7% 12 months on 12 months to now maintain a 9.2% market share.
Lidl boosted gross sales by 21.5% to take its market share to a brand new file excessive of seven.2%.
In distinction, Tesco’s gross sales grew 3.1%, whereas they fell 1.9% at Waitrose and by 4.6% at Morrisons.
Grocery value inflation hits file 14.7%
Grocery store inflation within the UK has soared in the direction of 15%, driving up the typical invoice by £682 per 12 months.
Grocery costs had been 14.7% increased than a 12 months in the past in October, Kantar Worldpanel stories, as buyers continued to be hit by rising prices.
That’s the very best studying on file, and means buyers would face paying an additional £682 per 12 months in the event that they didn’t commerce right down to cheaper gadgets, or just not purchase as a lot.
Costs are rising quickest in markets reminiscent of margarine, milk and pet food, stories Kantar.
Worryingly, Kantar cautions it’s ‘nonetheless too early to name the ceiling’ on rising costs.
Gross sales of personal label gross sales rose by over 10%, as individuals tried to save lots of the place doable, whereas the branded items market grew far slower at 0.4%.
Right here’s Fraser McKevitt, head of retail and shopper perception at Kantar:
“But once more, we’ve a brand new file excessive determine for grocery value inflation and it’s too early proper now to name the highest.
Shoppers face a £682 bounce of their annual grocery invoice in the event that they proceed to purchase the identical gadgets and simply over 1 / 4 of all households [27%] now say they’re struggling financially, which is double the proportion we recorded final November.
9 in ten of this group say increased foods and drinks costs are a serious concern, second solely to power payments, so it’s clear simply how a lot grocery inflation is hitting individuals’s wallets and including to their home worries.”
Gross sales of Halloween gadgets had been down this 12 months, whereas 32% fewer buyers have purchased their Christmas pudding than this time final 12 months.
The subsequent few months will spotlight the extent of the excessive road’s polarisation, flags Sophie Lund-Yates, fairness analyst at Hargreaves Lansdown:
“Primark is experiencing vital price inflation and a really unsure demand backdrop. Regardless of this, it’s vowed to maintain costs regular following a latest spherical of will increase.
That is an integral a part of the group’s potential to maintain prospects coming by means of the doorways. With out being the reasonably priced identify on the excessive road, Primark loses virtually all its bargaining energy. Primark is nicely conscious that pushing costs too far will do nothing however alienate its core prospects.
The launch of a click on and acquire trial shall be lauded by followers of the store, which regardless of latest revamps, nonetheless leaves lots to be desired on the web site entrance. Whereas disappointing, it’s the dearth of enormous scale supply infrastructure that helps Primark maintain its costs at engaging ranges.
Primark has “discovered its ft once more”, says Richard Hunter, head of markets at interactive investor, as UK buyers have flocked again to its shops.
Its working revenue margin of 9.8% is above expectations, whereas the power of buying and selling at its UK shops has greater than offset a weaker efficiency in Europe, the place shopper confidence has dragged.
AB Meals is conscious of the temper music, and has determined to make no additional value will increase in its shops along with those already introduced for the following two buying seasons.
Though Primark’s buying and selling was robust within the UK and the Republic of Eire, it remained under pre-pandemic ranges in Continental Europe.
ABF explains:
Client confidence [in Europe] was typically weaker and market knowledge for some markets point out that the overall attire market was nonetheless nicely under pre-Covid ranges.
Commerce was affected by the exceptionally sizzling summer season months and with colder climate we’ve seen many markets enhance.
Primark has achieved “spectacular outcomes in opposition to the cruel financial backdrop”, says Richard Lim, CEO of Retail Economics:
ABF’s outcomes present that Primark greater than doubled its adjusted working income within the 12 months to 17 September, to £756m, as prospects returned to excessive streets and retail parks.
Lim says Primark, with its concentrate on reasonably priced garments, may very well be in demand as prospects look to chop spending:
The retailer is well-positioned to learn from customers who’re buying and selling down and placing decrease prices on the coronary heart of their shopping for choices.
Many consumers are ready to sacrifice perceived high quality and the comfort of on-line supply for decrease prices and it’s driving individuals again into shops throughout elements of the sector.
“Nonetheless, there’s an ideal storm of price pressures dealing with the retailer from spiralling enter and working prices and the affect of a weaker pound and rising rates of interest.
Resisting additional value will increase this 12 months (past these within the pipeline) will assist Primark shield and construct market share in the long term, Lim provides:
It’s inevitable that margins shall be hit, however they’re prone to climate the storm higher than most with a value-driven proposition and diversified enterprise because the economic system enters recession.”
UK retailers braced for robust Christmas as buyers really feel squeeze
Larry Elliott
Britain’s retailers are bracing themselves for a troublesome Christmas buying and selling interval as hard-pressed customers react to a worsening price of residing disaster by slicing again on spending.
The month-to-month snapshot of spending by Barclaycard, which accounts for half of debit and bank card transactions, discovered that fifty% of customers had been planning to tighten their belts this Christmas, slicing again on presents, foods and drinks, and socialising.
Esme Harwood, a director at Barclaycard, stated:
“Rising petrol and grocery store prices proceed to chunk however Brits are spending much less on power payments as authorities help kicks in and other people discover methods to economise at house.
Shoppers proceed to swap large nights out for cosy evenings in as they scale back their discretionary spending, whereas well being and wonder, and residential enhancements take pleasure in a bit enhance.”
Two in three customers (66%) had been discovering methods to save lots of power at house to scale back the price of their fuel and electrical energy payments, Barclaycard discovered. Lots of these had been carrying extra layers at house (63%), whereas 56% had been avoiding utilizing central heating until completely mandatory.
Primark to carry costs to ‘stand by prospects’
With shopper disposable revenue falling as a result of hovering inflation, Related British Meals has determined not to herald additional value will increase on Primark’s autumn/winter and spring/summer season ranges (past these already applied or deliberate).
George Weston, chief govt of Related British Meals, explains:
Primark has confronted vital enter price inflation and sharply transferring forex alternate charges.
We now have determined to carry costs for the brand new monetary 12 months on the ranges already applied and deliberate and to face by our prospects, slightly than set pricing in opposition to these extremely risky enter prices and alternate charges.
Introduction: Primark proprietor dealing with ‘extremely risky’ enter prices and alternate charges
Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world economic system.
With its grocery, sugar, agriculture, elements and retail divisions, Related British Meals is a stable bellwether of financial situations.
And this morning, the proprietor of the Primark clothes chain has warned that it faces rising prices, simply as the price of residing disaster hits spending.
In its full-year outcomes, ABF says it confronted price inflation throughout an unprecedented vary of inputs within the final 12 months, at the same time as income bounced again because the affect of Covid-19 light.
Chairman Michael McLintock estimates that inflation pushed up prices throughout the Group by some £1bn on this 12 months alone within the final 12 months.
He says ABF:
…encountered essentially the most difficult financial situations for a few years with sharply rising and broadly based mostly inflation, in addition to extremely risky enter prices and alternate charge.
And he provides:
Though laborious work has efficiently recovered a lot of this price inflation, extra stays to be carried out.
Primark faces a variety of challenges. ABF says enter price inflation is anticipated to be vital within the 12 months forward, as a result of rising uncooked supplies and power prices, and better wages.
The agency additionally faces increased buying prices which have resulted from the strengthening of the US greenback in opposition to sterling and the euro.
Within the 12 months to 17 September, gross sales at Primark had been 43% increased than final 12 months, at £7.7bn, as its retailers reopened after pandemic lockdowns.
ABF made a statutory revenue earlier than tax for the final 12 months of £1,076m, up 48%.
For the 12 months forward, ABF expects vital gross sales progress throughout the busines, however expects a fall in adjusted working income and adjusted earnings per share, as a result of these increased prices.
Some retailers have launched their Christmas adverts early, to assist prospects unfold the price of the festive season (and to drum up additional demand, little doubt). However there are indicators that households are slicing again this 12 months.
Retail gross sales grew by simply over 1% in worth 12 months on 12 months in October, in line with the most recent survey from the British Retail Consortium (BRC). With inflation at round 10%, which means gross sales volumes fell as buyers purchased fewer gadgets per go to.
On-line retailers noticed gross sales decline in each class, other than furnishings, as customers seemed for bargains on the excessive road and retail parks.
BRC chief govt Helen Dickinson stated individuals have been snapping up electrical gadgets to assist them by means of the power disaster:
“With November Black Friday gross sales simply across the nook, many individuals look to be delaying spending, notably on greater purchases.
“Clothes and footwear, which noticed stronger gross sales this 12 months, declined because the gentle climate meant prospects held again on shopping for winter outfits. In the meantime, electrical blankets, air fryers and different energy-efficient home equipment continued to fly off the cabinets as individuals sought future price financial savings.
The agenda
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7.45am GMT: France’s commerce stability for September
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8am GMT: Kantar grocery store gross sales report for October
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10am GMT: Eurozone retail gross sales
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12pm GMT: NFIB index of US enterprise optimism
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12pm GMT: Russia’s financial coverage report