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Sainsbury and Tesco vs Aldi and Lidl: Can UK supermarkets claim the Christmas sales rosette?

By David Burrows

11:32, 5 January 2023

Brand logos for major UK supermarkets. Photo: Getty
Who is taking the lion's share of business as consumer belts tighten? Photo: Getty

Has it been a good or bad Christmas period for the retail sector?  So far, the numbers point to the former rather than the latter. But it is early days.

This morning Next (NXT) revealed an impressive Christmas performance, full price sales were up 4.8% in the nine weeks to 30 December - much better than expectations. Next has increased its profit before tax guidance for the year by £20m to £860m.

Charlie Huggins, Head of Equities at Wealth Club, commented: "This is another impressive performance from the bellwether of the UK High Street, reinforcing Next's reputation as one of the best run UK retailers.”

He added: “The group benefited from a cold snap in December, which has boosted demand for winter clothing, as well as the absence of pandemic restrictions, aiding store performance.

“Nevertheless, this shouldn't take away from Next's stellar execution. Many other retailers have struggled in the current environment, but Next's proposition is clearly resonating with the UK consumer”.

Next share price chart

The better-than-expected numbers from Next come hot on the heels of positive news from Aldi, which yesterday reported its December sales were up 26%.

And European value retailer B&M (BME) revealed today group revenue growth in the quarter of 12.3% year-on-year, with full -year 2023 group adjusted EBITDA now expected to be in the range of £560m to £580m - ahead of analysts’ consensus estimate of £557m.

Commenting on the latest figures, Alex Russo, Chief Executive at B&M, said: “Our strong momentum throughout the Golden Quarter across the businesses demonstrates the strength of our unchanged strategy to relentlessly focus on price, product and excellence in retail execution.”

Greggs (GRG) is another retailer (once again in the ‘value’ category) that enjoyed a decent run up to Christmas - fourth quarter receipts in its bakery shops grew by 18.2% when compared with the same period the year before.

B&M and Aldi are both in the low-cost, no-frills space (as too is Greggs to an extent) – so do their positive trading numbers represent a win for the discounters?

We won’t have long to find out as Tesco (TSCO) , Sainsbury (SBRY) and M&S (MKS) all have trading updates for the Christmas period next week. There's also BRC like-for-like retail sales data to provide further insight.

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Fight for market share

Danni Hewson, financial analyst at AJ Bell suggests Aldi’s impressive performance will have led some to wonder just where it’s increased share is being nabbed from – the non-discounters perhaps?


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“With fresh food inflation soaring to record highs, putting those festive feasts on the table became quite a task for savvy shoppers and there was plenty of Christmas campaigning underway to tempt consumers through the doors.

“With credit card spend on the rise, it could be many threw caution to the wind to indulge in an affair to remember. But overindulging could lead to a real hangover in 2023, something which will be of concern to retailers as well as households.”

Hewson is mindful that despite the final quarter of 2022 showing some retailers in good shape, the environment in 2023 could be very tough indeed for both stores and consumers.

 “Amid warnings that retailers might be forced to raise prices in the spring once energy support for business peters out, it’s clear inflation will remain the word du jour for some time to come”.

She adds: “Rishi Sunak might have struck an optimistic tone with his assertion that the rate prices are rising will halve this year, but twelve months is a long time for people and businesses to get through. Even if energy prices do come in below previously forecast levels by the summer, there’s still a whole load of variables in the mix.

Huggins remains cautious too. Looking ahead to 2023 he points out that successful names like Next are likely to see sales fall modestly, with profits down close to 10%, as cost pressures take their toll.

“That said, this outlook is not as bad as it could have been at the time of the disastrous mini-budget, when sterling was in the doldrums”.

Next expects cost inflation to peak at around 8% in the spring summer season before coming down. As Huggins explains, that looks a lot more manageable than it did a few months ago, largely reflecting the recovery of sterling (80% of Next's purchases are in US dollars).

“Next, and the rest of UK retail, are still facing a very difficult economy in 2023. But if the recovery in sterling is sustained, it will certainly provide some succour. And even if it doesn't, Next looks better positioned than most retailers to weather the storm," he says.

Ben Yearsley, investment consultant at Fairview Investing, echoes this positive sentiment: “Next has proven over time to be probably the most resilient and well-run fashion retailer and I expect them to weather the storm”.

But if you take the view that Next is in a best-of -breed category and more resilient than most right now, there may be good reason to expect less encouraging numbers from other UK retailers in the coming weeks and months.

Markets in this article

91.60 USD
1.85 +2.070%
B&M Europealue Retail
4.6065 USD
0.029 +0.660%
29.27 USD
0.16 +0.550%
3.086 USD
0.065 +2.190%
2.679 USD
-0.008 -0.300%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

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