Retail sales and results
Sales
Despite positive news from some UK retailers, including Next and Sainsburys, announcing that Christmas trading was ‘better than expected’, the latest ONS retail sales index reveals a different story. Retail sales values did rise in December, by 3.3% compared to the same period last year, however the increase in spend was driven by inflation. Sales volumes actually declined by -6.1% compared to December 2021. Online sales saw the biggest fall. In December 2022 they accounted for 25.4% of all retail sales compared to 28.8% in December 2021, although much of this was driven by the disruption caused from the Omicron variant but also postal strikes which affected parcel deliveries during December 2022.
RETAIL SALES
Source: ONS
Springboard data revealed that footfall across the UK was just 11% down compared to pre-pandemic levels and for Retail Parks, footfall was almost back to 2019 levels at -0.8%. Consumer confidence continued to improve, albeit slowly, tracking at -42, up from -47 in October according to GfK. We expect this to continue improving throughout 2023, as inflation is believed to have reached its peak, and is forecast to fall over the course of 2023 which should result in consumers having more disposable income.
FOOTFALL CHANGE VS 2019
Source: Springboard
In December 2022, the discounters (Aldi and Lidl) lost a small amount of market share (-0.4%) compared to November 2022 whereas the top 4 (Tesco, Sainsburys Asda and Morrisons) saw a combined increase of 0.9%. However, this is not unexpected as consumers typically tend to trade-up during December – a trend which we have seen in previous years. As Aldi and Lidl continue with ambitious expansion plans across the UK over the next 2-3 years their market share will increase across the UK, which will likely see the top 4’s market share being eroded further. We could see the grocers enter into more brand acquisition/partnerships during 2023 following on from recent announcements that Sainsburys will soon sell clothing from online retailer Sosander, and Tesco’s recent acquisition of the Paperchase brand to sell products in its own stores (it has not acquired the 100-store estate).
KANTAR GROCERY MARKET SHARES
Source: Kantar
Results
WINNERS
Aldi
Aldi announced sales in December totalled £1.2 billion across the UK which is 26% higher than December 2021. Despite inflation playing a part in this large revenue increase, its customer base has been growing and it recently knocked Morrisons off of fourth spot in terms of grocery market share.
B&M
B&M had a strong Q3 performance and was said to have performed well over the Christmas period. The UK business saw revenue reach £1.3 billion, up 10.3% on the same period the previous year with like-for-like sales up 6.4%.
Currys
Despite a sales decline of -5% year on year, driven by a slowdown in demand for expensive electrical products it is expected to have gained market share over the period, driven by its large store portfolio. It said it had a stronger-than-expected Christmas profit performance and that profits had been higher than forecast.
Dunelm
The UK homewares market leader saw its Q2 total sales increase by almost 18% compared to the same period last year driven by its winter sale. Dunelm also benefitted from consumers trying to cut down on their energy bills - it reported that heated indoor airers sold well as consumers switched to these instead of using tumble-dryers.
Marks & Spencer
Reported a strong Christmas trading performance, unsurprisingly in its food division where like-for-like sales rose by 6.3% - outpacing Tesco and Sainsburys in terms of like-for-like performance.
Next
Next announced that its festive trading period was better than expected; it forecast a -2% fall in full-price sales in the nine weeks to the end of December but sales rose by 4.8%. As a result, it has increased its profit guidance (before tax) for the full year to 31 January. It also saw sales in store grow by 12.5% compared with only a 0.2% rise online.
Pets at Home
Reported like-for-like retail sales growth of 7.6% in the 12 weeks to 5 January 2023, aided by its subscriptions and loyalty schemes. It has raised its profit outlook and its share price increased by over 10% following the upbeat trading statement
Sainsburys
Sainsburys reported Q3 grocery sales increased by 5.6% compared to the same period in 2021and by 12.5% on a two-year basis. It did attribute some of this to inflation but also to its ‘food first’ strategy, which is targeting customers seeking high-quality items at an affordable price.
Tesco
Like many of the grocers, Tesco experienced a strong performance over Christmas. During the 6 week period to 7 January UK like-for-like sales increased by 7.2% with performance being stronger in its larger store formats, where like-for-like sales increased by 8.1%.
WH Smith
Group revenue at WH Smith increased by 41% on the year, with like-for-like sales up 26% compared to the previous full year. This was driven by its travel business, which was significantly impacted by the pandemic but is now recovering well and it plans to open 130 new travel stores in the future.
Wickes
Total sales for the year grew 3.5%, driven by a strong trading performance during Q4. Rising energy prices saw consumers purchase products to help cut down on household bills (e.g. loft insulation and draft excluders) which helped boost sales.
LOSERS
Asos
Asos announced an 8% decline in UK sales for the final four months of 2022, but it said this was broadly in line with its forecast. It said that this trading period had been ‘volatile, and expects this to continue until the end of its trading year. It does expect to see an improvement, driven by its recovery strategy, in the second half of 2023.
Boohoo
Boohoo announced an 11% fall in sales during the Christmas period, which it said was in line with expectations. Group sales were £638 million pounds for the four months to December 31, down from £715 million compared to the same period in the previous year.
Halfords
While overall revenue increased, it issued a profit warning at the start of 2023. Cycling was the worst performing category, with revenues declining by 8.5%, following a large rise in cycle sales during the pandemic.
Wilko’s
Reported a loss in 2022 saying decline in consumer demand impacted trading with like-for-like trading falling by -3.1%. It was seeking to secure £30 million in emergency funding late 2022 to ease cost pressures heading into Christmas. Its performance was also impacted by strong competition such as B&M and Home Bargains.
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