Weak confidence in personal finances and a squeeze on disposable income will limit food retail sales growth to around 5% in 2023, trailing inflation and December’s growth rate, according to NielsenIQ data released on Tuesday.
In November, the Bank of England predicted that Britain would enter a long recession, with inflation remaining at 10.7% and not returning to the 2% target until early 2024. The government’s budget watchdog forecasted the most severe squeeze on living standards since records began in the 1950s.
“We also expect the recession to start to influence shopper behaviour and reframe overall retail spend,” Mike Watkins, NielsenIQ’s UK head of retailer and business insight said on Tuesday.
He predicted that by 2023, 33% of UK households would only have enough money for essentials, with only 5% able to spend freely. Consumers in the middle live comfortably but keep an eye on their wallets.
According to NielsenIQ, UK grocery sales increased 10.9% year on year in the four weeks ending December 31, masking a drop in volume when adjusted for inflation.
It stated that supermarkets benefited from extremely cold weather in early December as well as ongoing rail disruption due to labor strikes. Both reduced spending in the hospitality channels, allowing food retailers to increase their “share of calories consumed” from out-of-home channels.
NielsenIQ said discounters Aldi UK and Lidl GB were the best performers, with sales growth of 19.3% and 15.7%, respectively, over the 12 weeks to Dec. 31. This echoed data from rival market researcher Kantar published last week.
Sainsbury’s was the best performer among Britain’s traditional major supermarket groups, with sales up 8.5% over the previous 12 weeks, followed by market leader Tesco with an 8.0% sales increase and No. 3 Asda with a 7.9% sales increase. Morrisons was the worst performer, with sales falling 1.1%.
Marks & Spencer also did well, with sales increasing 9.0%.
Sainsbury’s shares were up 0.9% in early trading, while Tesco and M&S were both up 0.4%. However, shares of online grocer Ocado fell 2%.
Tesco, Sainsbury’s, and M&S are all expected to provide Christmas sales updates this week.
According to NielsenIQ, while online sales increased 2.8% in December, the company’s share of the grocery market fell to 10.4%, down from 11.2% a year ago.
Separately, surveys released on Tuesday by Barclays and the British Retail Consortium revealed that overall British consumer spending in December lagged inflation, resulting in a significant drop in real-terms spending despite contributions from Christmas shopping and the men’s soccer World Cup.
(Adapted from Reuters.com)
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