The Week Ahead: Trading updates due from Tesco, Sainsbury’s, Morrison and Marks & Spencer
THE winners and losers of the hard-fought Christmas trading period will be revealed this week as supermarket giants Tesco, Sainsbury’s and Morrisons report back on their festive sales performances.
Waging war through promotional deals and money-off coupons, the major players of the supermarket sector ramped up competition before Christmas as they sought to attract cost-conscious shoppers.
Waitrose, owned by the John Lewis Partnership, has already laid down an impressive marker with a 5.4% increase in like-for-like sales between December 18 and 31, despite scaling back its Christmas advertising.
That growth figure is expected to dwarf its larger supermarket rivals, with Morrisons likely to have suffered a particularly difficult Christmas.
The fourth-biggest grocery group, which reports on Monday, saw like-for-like sales, excluding VAT and fuel, fall 2.1% in its previous quarter after admitting it had not done enough to advertise its promotions.
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Despite a pledge to step up discounting and tactics to draw in hard-up shoppers – including a Christmas meal with all the trimmings from �2.49 per person – Morrisons is again seen reporting sales down by around 2%.
Broker Jefferies is even more pessimistic, believing same-store sales fell by as much as 2.8% as discounters such as Aldi and Lidl attract more business.
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The forecast slide, which comes despite Morrisons having an extra trading day compared with a year earlier, has fuelled fears of a profits warning.
Morrisons boss Dalton Philips is leading a major push to promote the chain’s fresh food credentials, announcing an advertising deal with TV presenters Ant & Dec and sponsorship of hit shows Britain’s Got Talent and Ant & Dec’s Saturday Night Takeaway.
Sainsbury’s, which follows on Wednesday with its update, has enjoyed better fortunes over the past year thanks to a well received money-off coupon campaign.
It said on revealing a 5% hike in half-year profits in November that it had printed nearly 250 million Brand Match money-off coupons since the scheme’s launch a year earlier.
Sales rose 1.7% for the six months to September 29, but the consensus across the City suggests growth may have eased back to 0.9% in a sign that Tesco’s fight-back is paying off.
Tesco, which reports on Thursday, is likely to have pulled out all the stops after a poor performance the year before and a disappointing previous quarter.
Sales slipped back into the red in the third quarter, down 0.6%, after being dragged lower by a poor performance in non-food, although industry data suggested a turnaround towards the end of the period.
The group saw the best sales growth of the “big four” players in the four weeks to November 25 and lifted its market share, according to Kantar.
Deutsche Bank is predicting sales up 0.8% in the six weeks to January 5 thanks to a “strong promotional package and an improved grocery offer”, alongside offers such as free Click and Collect grocery during December.
Panmure Gordon retail analysts believe Tesco notched up the strongest sales of the “big four” and are pencilling in a 1% gain, adding that the rise sets up a year of “significant strategic change” for the group.
Marks & Spencer will reveal whether its Christmas advertising push won over shoppers after the retailer ditched its usual roster of celebrities for a music-inspired campaign.
Featuring familiar hits such as Kool & The Gang’s Celebration and an exclusive Rod Stewart cover of Have Yourself a Merry Little Christmas, the adverts were a break from tradition for the retailer, with models instead of celebrities, including Seb White, a four-year-old with Down’s syndrome.
The campaign won M&S acres of coverage, but experts remain unconvinced that the retailer’s Christmas performance will have been enough to offset recent trading woes and a tough comparative period from the year before.
M&S, which reports its figures on Thursday, has been leading an overhaul after costly mistakes in its womenswear ranges left it nursing a 10% drop in half-year profits and a sharp sales slide.
M&S showed signs that it was beginning to turn the corner after non-food sales fell by a better-than-feared 1.8% in the second quarter.
This was a marked improvement on the 6.8% slide seen in the first three months, which was its worst performance for more than three years.
Its food division also saw a steady second quarter, with sales up 1.6% on a like-for-like basis.
But the group will have seen stiff competition from the likes of John Lewis and Next, which have already reported solid Christmas figures.
Most analysts believe general merchandise sales declines will have improved marginally over the third quarter, down 1.5% on a like-for-like basis.
Yet food sales growth is expected to have slipped to 0.5% in a sign of the intense market conditions.
Panmure Gordon experts said that while M&S still had “bags of potential”, they remained cautious on the group after it warned of volatile trading at the half-year results and amid signs of heavy discounting to shift stock.
Under-pressure chief executive Marc Bolland said he was taking “decisive action” to resolve mistakes after failing to stock up on best-selling womenswear ranges earlier in the year.
He said the group was taking bolder steps to back key fashion trends, such as military coats, while he also overhauled the general merchandise team and hired new managers, including drafting in former Debenhams and Jaeger boss Belinda Earl to revitalise womenswear in the newly-created role of style director.
But Mr Bolland cautioned that customers would only fully start to see the benefits of its management reshuffle after next year’s spring and summer ranges, as the group buys stock so far in advance.
A recent advertising blitz is expected to have helped Domino’s Pizza in its crucial fourth quarter after a recent slowdown in sales growth.
The fast food delivery group, which updates on full year trading on Tuesday, recently worried the market when third quarter sales showed sales growth slipping compared with the first half.
Sales rose 7.9% to �136.4 million in the third quarter, including a 3.7% rise in like-for-like sales in the UK and Ireland amid the wet summer and major events such as the Olympics and Euro 2012.
But this was less than the 5.7% rise seen in the UK over the first half and shares fell as a result.
Domino’s has since upped the ante, with more products added to its menu such as twisted dough balls and stuffed crusts, as well as a sharp increase in advertising and marketing going into its all-important final quarter.
It is estimated that the fourth quarter accounts for a third of Domino’s annual sales.
Numis analyst Douglas Jack said he believed the recent moves made by the group have boosted trade, adding that City forecasts assuming a sales fall in the fourth quarter were likely to prove wrong.
“We believe like-for-like sales are unlikely to decline due to fourth quarter advertising being up by around 90%, extended trading and strong performances from new products,” he added.
Most analysts are expecting pre-tax profits to rise to �46.3 million over the year to December 30, up from �43.6 million the previous year.
Domino’s has 770 outlets, which are primarily run through franchisees.
The group holds the master franchise to own, operate and franchise Domino’s Pizza outlets in the UK, Ireland and Germany, having opened its first UK store in Luton in 1985.
Debenhams shares may have doubled in the last year following better-than-expected trading, but this has failed to stop analysts worrying that sales before Christmas were too dependent on promotions.
Panmure Gordon stockbrokers said figures on Tuesday are expected to show a 1.5% rise in like-for-like sales, offset by uncertainty over margins after reported discounts of up to 50% in the peak trading week before Christmas.
Freddie George, analyst at Seymour Pierce stockbrokers, added that he was also concerned that Debenhams had “lost its halo effect in beauty” and that its promotions had not delivered the necessary uplift.
Rivals John Lewis and Next have already impressed the City with their trading figures, despite evidence that shoppers held off spending until the last minute.
The British Retail Consortium said it believed Christmas hadn’t been a boom time for UK retailers.
Shares in FTSE 250 company Debenhams, which has 161 shops in the UK and Ireland, have gained 96% over the last year.
It announced plans last year to open another 17 UK stores over the next five years in a move that will create 1,700 jobs and add more than �150 million in sales.
It comes on top of a nationwide store revamp programme which has seen 18 shops modernised.
The group revealed its expansion plans as it reported a 4.2% rise in pre-tax profits to �158.3 million for the year to September 1 after a recent sales revival.