Re­tail­ers suf­fer the worst De­cem­ber since re­ces­sion of 2008

The su­per­mar­ket seems to be pin­ning its hopes on a merger with Asda af­ter miss­ing out on gro­cers’ Christ­mas bo­nanza

The Daily Telegraph - Business - - Front Page - By Ash­ley Arm­strong and Anna Isaac

RE­TAIL­ERS have suf­fered their worst De­cem­ber since the re­ces­sion af­ter shop­pers de­layed spend­ing and aban­doned the high street to hunt for bar­gains on­line.

Last month’s trad­ing was as tough as in 2008 when the high street was bat­tered by the credit crunch, ac­cord­ing to sales fig­ures com­piled by the British Re­tail Con­sor­tium and KPMG. It comes as of­fi­cial statis­tics show the sav­ings ra­tio for UK house­holds has reached mi­nus 0.2pc, sug­gest­ing fam­i­lies are out­spend­ing their earn­ings, and de­spite record low un­em­ploy­ment and im­prov­ing wage growth.

Weaker bal­ance sheets may be mak­ing house­holds in­creas­ingly price sen­si­tive, with lenders re­port­ing that they ex­pect de­mand for credit-card lend­ing to de­cline in the fi­nal three months of the year.

Over­all, re­tail sales were stag­nant, with 0pc growth in De­cem­ber, com­pared with a rise of 1.7pc in the same month in 2017. Yet on a like-for-like ba­sis, sales fell by 0.7pc com­pared with the same month in 2017.

Paul Martin, UK head of re­tail at KPMG, said: “This comes de­spite some re­tail­ers des­per­ately at­tempt­ing to gen­er­ate sales through slashed pric­ing, which has seem­ingly not been enough to en­cour­age shop­pers.”

Food pur­chases out­per­formed items such as clothes and shoes, with sales ris­ing by 0.6pc in the three months to the end of the year on a like-for-like ba­sis, con­trast­ing with a 1.2pc slide in non-food re­tail.

The rise of on­line shop­ping con­tin­ued apace, with its share of sales hit­ting 31.2pc last month, up from 29.1pc in De­cem­ber 2017.

The grim shop fig­ures fol­low com­plaints by su­per­mar­ket bosses that shop­pers waited un­til the very last mo­ment to do their Christ­mas shop­ping.

Sains­bury’s boss Mike Coupe said yes­ter­day it had been hurt by a “down­trad­ing” trend, with shop­pers tar­get­ing cheaper op­tions.

The su­per­mar­ket posted a 1.1pc drop in like-for-like sales af­ter its Ar­gos busi­ness lost cus­tomers to the deep dis­counts of­fered by ri­vals.

High street re­tail­ers with a size­able on­line pres­ence have been out­per­form­ing their bricks-and-mor­tar ri­vals.

Marks & Spencer, Deben­hams, John Lewis and Tesco will to­day re­veal how they fared.

‘Christ­mas came late this year”, ac­cord­ing to Sains­bury’s boss Mike Coupe. Or, in the case of Britain’s num­ber-two su­per­mar­ket, it didn’t come at all. Sains­bury’s fin­ished firmly bot­tom of the pile over the fes­tive trad­ing pe­riod, re­port­ing a 1.1pc fall in like-for-like sales, much worse than the 0.2pc drop an­a­lysts had pen­cilled in. These are wor­ry­ing fig­ures but per­haps more con­cern­ing is Coupe’s at­tempt to blame “cau­tious cus­tomers”. Try telling that to his ri­vals, all of whom, bar Waitrose, posted bet­ter num­bers.

Although it was the worst Christ­mas for the high street in a decade, food re­tail­ers bucked the trend and had a fes­tive feast. A record £30bn was spent on Christ­mas food be­tween the be­gin­ning of Oc­to­ber and the end of De­cem­ber – £450m more than same pe­riod in 2017. The av­er­age house­hold gro­cery bill was a whop­ping £383 in De­cem­ber alone and Satur­day the 22nd proved to be the busiest shop­ping day of the year. More than half of all house­holds vis­ited one of the gro­cers on that day, with 1.7m ad­di­tional cus­tomers hit­ting the su­per­mar­kets com­pared with the Satur­day be­fore.

And there was cer­tainly no cau­tion be­ing shown in the aisles of Aldi or Lidl. Two thirds of UK house­holds shopped at the Ger­man dis­coun­ters in the weeks to Dec 30, hand­ing them their biggest ever slice of gro­cery shop­ping – a com­bined mar­ket share of 12.8pc. Sales were up 10.4pc at Aldi, hand­ing it the crown of the fastest-grow­ing su­per­mar­ket, while Lidl ex­pe­ri­enced growth of 9.4pc.

While mar­ket share slipped at all the ma­jor su­per­mar­ket chains, Sains­bury’s was the only one to post fall­ing sales, cap­ping a thor­oughly mis­er­able Christ­mas. Even its gen­eral mer­chan­dise arm, sup­pos­edly boosted by the £1.4bn takeover of Ar­gos, flopped with a 2.3pc sales de­cline.

Coupe, mean­while, has been left talk­ing up the suc­cess of the chain’s £9 tur­key crowns and 30p veg­eta­bles. Per­haps its new cus­tomer feed­back chan­nel – “Let­tuce Know” – will give man­age­ment a bet­ter idea of what’s gone wrong.

It says a lot about Sains­bury’s that its hopes in­creas­ingly seem to rest on a £11bn mega-merger with Asda. There is no doubt that the tie-up will cre­ate a for­mi­da­ble new player – Coupe says it will put a rocket un­der prof­its, boost­ing the bot­tom line by £500m – with far greater mus­cle to com­bat the re­lent­less threat of the dis­count kings and the grow­ing chal­lenge from dig­i­tal com­peti­tors such as Ama­zon and Ocado.

Still, that’s no rea­son to think it will get past the com­pe­ti­tion au­thor­i­ties. The deal would leave be­tween 50pc and 60pc of the mar­ket con­cen­trated in the hands of two su­per­mar­kets – Tesco and Sains­bury’s/Asda. The Com­pe­ti­tion and Mar­kets Au­thor­ity will surely have grave con­cerns over the creation of a du­op­oly with such a stran­gle­hold over the food on peo­ple’s ta­bles. Cus­tomer choice can only suf­fer.

Equally wor­ry­ing is the im­pact it will have on small sup­pli­ers. Coupe has pledged to slash prices on key prod­ucts by 10pc, mostly by ne­go­ti­at­ing bet­ter terms with the 100 biggest sup­pli­ers, but the idea that the smaller ones will be spared sim­ply isn’t cred­i­ble.

Of a com­bined 5,500 sup­pli­ers that sell goods to Sains­bury’s and Asda cur­rently, nearly half are small busi­nesses at the mercy of a much more pow­er­ful beast, and the gro­cery in­dus­try has a poor track record when it comes to the treat­ment of sup­pli­ers.

There have been two ma­jor in­quiries in re­cent times into this area. A Com­pe­ti­tion Com­mis­sion probe in 2000 cre­ated of a code of prac­tice but failed to pre­vent a wave of com­plaints about the ex­ploita­tive be­hav­iour that was putting many small shops out of busi­ness. Eight years later, a se­cond in­quiry con­cluded that fur­ther ac­tion was needed to pro­tect those small busi­nesses that kept the shelves stocked with goods.

Jobs will un­doubt­edly be lost as a re­sult of the merger, and share­holder value could also take a se­ri­ous hit from the com­plex in­te­gra­tion that will have to take place.

Sains­bury’s and Asda both face huge dif­fi­cul­ties if the merger doesn’t go through, but that doesn’t mean it should hap­pen. Many of their prob­lems are self-in­flicted and the pair seem short on ideas.

‘Sains­bury’s fin­ished bot­tom of the pile over the fes­tive trad­ing pe­riod’

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