Supermarket group’s house broker forecasts Dalton Philips will reveal drop in like-for-like sales next week
Morrisons and Sainsbury’s were the biggest fallers in the FTSE 100 on Wednesday after they were singled out as potential turkeys in the Christmas trolley wars.
Oriel analyst Jonathan Pritchard said the biggest trading weeks of the year had been “clearly tough” for the UK’s supermarket giants, which are struggling to match previous years’ sales figures as inflation erodes shoppers’ spending power.
“It appears the established 2012 podium lineup (Waitrose and the discounters Aldi and Lidl) stretched their lead, but the biggest slowdown may have come at Sainsbury,” said Pritchard, helping send shares in the UK’s third largest grocer down 9.1p to 336p, a fall of more than 2%.
A note entitled A Tough Christmas from Morrisons house broker Jeffries also knocked confidence in the Bradford-based grocer, which finished down 2% at 257.4p. James Grzinic, of Jeffries, predicted Morrisons boss Dalton Philips would reveal a 2.8% drop in like for like sales for the six weeks to 30 December on Monday. Morrisons, which does not yet have a grocery website, is being left behind as the rock bottom prices offered by the discounters steal its traditional no frills formula.
“We expect Morrisons to kick off the January trading season in a weak manner,” said Grzinic. “We expect hard discounters to have experienced a disproportionate improvement in market share over Christmas, particularly in the north of England. Secondly, more affluent consumers’ migration to online shopping seems to have accelerated over the festive season.”
Despite the tough economic backdrop Waitrose last week revealed record Christmas sales, with like for like sales up 4.3% in the seven weeks to 24 December. Its online grocery arm, Waitrose.com, also enjoyed dramatic growth, with sales up 37%. While Waitrose’s winning strategy was to cut prices and up the ante on promotions, Pritchard said some of its rivals had done the opposite and “eased the odd price up” to shore up profits.
Some retail experts think concerns about Sainsbury’s performance are overdone and stem from fears it has the most to lose at the hands of a resurgent Tesco. This time last year the UK’s biggest retailer delivered a shock profit warning that was the catalyst for a major shakeup, with recent industry data suggesting the turnaround set in train by chief executive Philip Clarke is starting to win back shoppers.
Unlike Tesco, which next week will update investors for trading in the six weeks to 5 January, Sainsbury’s will report sales for the whole of its third quarter, with analysts pencilling like for like sales growth of just under 1%.