UK Economy
Black Thursday for big UK retailers; Aldi and Lidl celebrate bumper Christmas
By Finfacts Team
Jan 9, 2014 - 9:38 AM

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Three of the UK's biggest retailers had grim news on Christmas trading today with Morrisons, the supermarket chain, issuing an unscheduled profit warning while Tesco and Marks & Spencer posted worse-than-expected sales in what has turned out to be a Black Thursday. Meanwhile, Aldi and Lidl, the German retailers, celebrated a bumper Christmas in the UK.

Morrisons said full-year underlying profit would be below market expectations of £812m and is now expected to be about £783m.

It said the "Christmas period has been very challenging with a slowdown in market growth. Hard pressed consumers elected to economise and managed their budgets very tightly, buying less and shopping selectively across a range of formats and retailers.  In the 6 weeks to 5 January 2014 total sales excluding fuel were down by 1.9% (3.3% including fuel). Like- for-like sales* declined by 5.6% (7.1% including fuel)."

The retailer added that the difficult market conditions were intensified for Morrisons by the accelerating importance of the online and convenience channels, where Morrisons is currently under-represented, and by targeted couponing which was particularly prevalent in the market this Christmas. "Although the strength of our unique supply chain and the commitment of our colleagues enabled us to maintain high standards of service and strong availability throughout this peak period, our sales performance was not as strong as we had planned."

Tesco said group sales in the six weeks to 4 January 2014 declined by (1.2)% including petrol ((1.6)% at actual exchange rates) and declined by (0.6)% excluding petrol ((1.1)% at actual exchange rates).

In the UK, total sales including VAT and petrol declined by (1.5)% and by (0.6)% excluding petrol, with like-for-like sales declining by (2.4)%.

The company said the "results were driven primarily by a weaker grocery market, and also reflect the impact of a tougher comparative. Our decision to significantly reduce our new store opening programme and our ongoing work to transform our general merchandise offer are also holding back top-line performance in the short term, particularly relative to others in the sector."

Total international sales declined by (0.7)% at constant exchange rates, excluding petrol – an improvement from the third quarter, despite continuing external challenges in the majority of our markets. Foreign exchange rates impacted both of our regions negatively for the six-week period, resulting in a total sales decline of (2.2)% at actual rates, excluding petrol.

Marks & Spencer said today non-food sales in the three months to 28 December were below its own expectations. Group like-for-like sales in the eight weeks before Christmas were up 1% but over the third quarter they fell 0.2%.

Marc Bolland, the chief executive, said improved performance over Christmas could not make up for falling sales of clothes and other general merchandise in an unusually warm October.

M&S said given continued pressure on disposable incomes, "we remain cautious about the outlook. Our focus is on continuing to transform Marks & Spencer into an international, multi-channel retailer."

Aldi said it had its  best Christmas since opening in Britain in 1990 and Lidl said it had seen its best performance to date over the festive period.

Lidl said it had its busiest Christmas since its UK launch in 1994 and in its 600 stores it had a sell-out of fresh British turkeys on Christmas Eve, while its Comte de Brismand champagne was its top selling product in value terms.

A spokesman said: “2013 has been our most successful year in the history of Lidl UK and we would hope to see this continue throughout 2014.”

Aldi, which has more than 500 UK shops, doubled the size of its Christmas range, increasing stocks and offering more exclusive products. It said fresh lobster tails, fresh free-range Roly Poly turkey and luxury mince pies were all hits.

An Aldi spokesman said: “Our customers know they don’t have to wait for price cuts or promotions to save money.”

Kantar Worldpanel data in December showed more than half of UK households shopped in Aldi or Lidl in 12 weeks to December 8.

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