British retail boost as two major firms record soaring sales over Christmas period

Business

Eamonn Holmes pays tribute to retail workers at Christmas

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Earlier this week, market researcher NielsenIQ placed M&S as the fastest growing supermarket at the end of last year and trading results today (Thursday) appear to have stood this up. Food sales rose 12.4 percent in the final months of 2021 compared with the same period pre-pandemic. In November, M&S raised its profit guidance and today confirmed this remains on course, assuming no further material restrictions or lockdowns. Chief Executive Steve Rowe said: “Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value.

“Clothing & Home has delivered growth for the second successive quarter, supported by robust online and full price sales growth.

“Food has maintained its momentum, outperforming the market over both 12 and 24 months.”

Online sales have been a particular success for M&S – with growth of 50.8 percent.

It has also benefited from its tie up with Ocado, with M&S products representing 30 percent of baskets in December.

Tesco, meanwhile, saw profits for the 19 weeks ending on the January 8 rise 8.6 percent compared to two years ago.

It also boasted the highest market share in four years with share of both online and in store sales increasing.

Tesco chief executive Ken Murphy said: “Despite growing cost pressures and supply chain challenges in the industry, we continued to invest to protect availability, doubled down on our commitment to deliver great value and offered our strongest ever festive range.

“This put us in a strong position to meet customers’ needs as, once again, COVID-19 led to a greater focus on celebrating at home.

“As a result, we outperformed the market, growing market share and strengthening our value position.”

With sales coming in stronger than expected, Tesco says it now expects retail operating profit to be above the top end of its previous £2.5-£2.6bn forecast.

The two supermarkets join Sainsbury’s in seeing a bumper end to the year for British retailers.

Yesterday, Sainsbury’s upgraded its profit guidance to “at least” £720m before tax – up from £660m.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “This is yet more evidence that grocers are careering ahead with sales growth compared to pre-pandemic levels.

“With stores kept open throughout the crisis, due to their essential retailer status, shoppers have become used to visiting the grocers for a one stop shop for their needs and that trend is sticking around for longer than first thought.”

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While supermarkets have benefited from more people staying in over the Christmas period, questions now turn to how well they can keep the current performance going.

Inflation is expected to weigh heavily on shoppers’ budgets this year, with signs of a price war brewing this week as Sainsbury’s promised to match Aldi on the prices of 150 frequently bought products.

Remaining competitive on price could pose a particular challenge for Marks & Spencer’s growing food offering.

AJ Bell Financial Analyst Danni Hewson said: “Whilst consumers will still walk through the doors to pick up those nice to haves they might well only do so after they’ve done the bulk of their shopping elsewhere.

“It needs to understand that it can’t fight on price it has to really focus on its USP, clever positioning and temptation.”

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