Credit:  Julieanne Savage/Geograph

Supermarkets braced for week of painful results

Nobody likes January but Britain's grocers will be feeling particularly blue.

by Jack Torrance
Last Updated: 09 Feb 2016

Last week we got a decent glimpse into how the nation’s fashion and homeware retailers fared over the crucial Christmas period. Results were mixed: John Lewis soared, Next did ok but was hampered by warm weather and Marks & Spencer’s non-food sales slumped yet again.

This week it’s the turn of the supermarkets and it seems likely that we’re going to see a bloodbath. Morrisons will be first out of the blocks with a trading statement tomorrow. This was the first Christmas in charge for new boss David Potts, who replaced the ousted Dalton Philips last January.

Potts set about right away with a plan for radical change, slashing head office jobs, overhauling the company’s loyalty scheme, selling off its chain of convenience stores and ditching Philips’ much-derided salad misting machines. There have so far been few signs these changes have had any affect. Could tomorrow’s figures be the start of a remarkable turnaround or a huge blow to Potts’s street cred?

On Wednesday Morrisons will be followed by Sainsbury’s. The latter’s fortunes have been looking up in recent months as unofficial data from Kantar Worldpanel showed it was the only major supermarket with growing sales. Translating that into a successful Christmas would help cement boss Mike Coupe’s position, but given fierce festive competition that won't have been easy. 

Investors will be searching for any clues as to Coupe’s intentions regarding Home Retail Group. Last week it emerged that Sainsbury’s had approached the Argos and Homebase owner about a potential takeover bid. The offer was rebuffed, but there’s a chance Coupe could have another go before the end of the month.

Finally on Thursday we’ll get a glimpse of how Tesco’s Christmas panned out. Shares in Britain’s largest retailer rallied after boss Dave Lewis took drastic action to reverse its decline, but have been on the slide since March and ended the year 16% down on where they started after hitting their lowest level since the turn of the century.

In October the supermarket reported a 1.1% decline in like-for-like sales and a 55% plunge in underlying profits. Lewis will be hoping this Christmas was the time Tesco began to bounce back.

We won’t get figures from Britain’s other grocery giant, Asda, until its US parent Wal-Mart updates the markets next month. But it fired a warning shot yesterday with the announcement that it plans to ‘invest’ another £500m on price cuts in a bid to win back customers from discount rivals Aldi and Lidl.

'The structure of UK grocery retailing has permanently changed to reflect the way that customers shop today,' said its chief exec Andy Clarke. 'We saw the change coming and responded in 2013 but we didn’t move fast enough. There is currently no growth in the food market and the rise of the limited assortment discounters means that we must take radical action to win back our customers.'

Regardless of how good their figures are looking this week, it seems the supermarket price war is anything but over.

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