Supermarkets’ unprecedented sales growth has started to slow slightly as households gradually emerge from the coronavirus lockdown and return to more normal behaviour.
Over the previous 12 weeks, the grocery market as a whole grew till takings by 16.9% to £31.6bn, research by Kantar has shown, the fastest since records began in 1994.
While growth has softened in the most recent four-week period it still remains 14.6% higher than last year, with footfall 15% lower and the average spend on a supermarket trip 35% higher than a year ago.
Online grocery sales remain elevated, with year-on-year growth of 92%, edging up from 91% growth reported a month ago.
Data from Nielsen, also released on Tuesday morning, showed supermarket sales were up 10% in the past four weeks, slowing from 14% in last month’s report.
Online grocery sales accounted for 14% of all grocery spend in the past four weeks, Nielsen said, up from 13% and 10% in the prior two reports.
“Although restrictions have eased, more than one in five households still made an online order during the latest four weeks,” said Fraser McKevitt, Kantar’s head of retail and consumer insight.
Online, according to Kantar’s measures, accounted for 13.0% of all UK grocery sales over the past 12 weeks, up from 7.4% in March, before the virus made much of an impact on behaviour in the country.
Ocado customers have increased their shopping frequency by a third compared with last year.
WM Morrison Supermarkets PLC (LON:MRW) saw the strongest growth of the big four grocers in this period, with its sales growth accelerating to 17.4% from 10.5% a month ago, its growth ahead of the market in the past 12 weeks and gaining market share for the first time since 2015, to 10.3%.
Of the premium grocery players, Waitrose was said by Nielsen to have delivered 7.8% sales growth, while Marks and Spencer Group PLC (LON:MKS) sales were up just 3.8% as the city centre and travel hub elements of its food business acting as a drag.
While down from its peak, strong sales looks likely to continue to be elevated for the supermarkets because of the continued worries about the coronavirus, Kantar’s McKevitt suggested.
“Despite pubs, bars and restaurants re-opening recently, more than half of consumers say they are still uncomfortable with visiting a pub and 42% with visiting a café or restaurant,” he said, pointing to take-home alcohol sales up 41% as an example.
Promotional activity also picked up in the latest four weeks, with 29% of sales including some type of discount.
“Retailers scaled back promotions at the start of lockdown as they prioritised serving as many customers as possible and keeping shelves full,” said McKevitt.
“Now, they are putting the emphasis back on deals and collectively helped the average household save £45 on groceries this month.
“Promotional levels are still behind the pre-crisis level of 31% but, particularly given that the 2008 recession led to shoppers seeking out more discounts, we expect the grocers to bring in more enticing offers to attract cash-strapped shoppers in the months ahead.”
City analysts are increasingly of a similar view.
“The legacies of the Coronavirus crisis are yet to be fully understood but we feel the contraction of [food and beverage outlets] alongside [the working from home trend] represent permanent shifts, as is the stepped change in online,” said Clive Black of broker Shore Capital.
“The superstores are well-placed to harness these processes, much more so that the non-online German discounters and M&S, the latter with its substantial urban centre/travel hub trade.”
While the near- and mid-term economic outlook is hazy, Black said supermarket executive seem “switched on” the challenges of what UK recession may mean.
“With more robust demand, an ongoing focus upon cost control and capital discipline, we see the UK listed supermarkets, with stronger solvency ratios in tow too, as structurally more defensive. Hence, in the face of dull recent share price performances and somewhat liquidity infused equity markets, particularly mega-tech, the humble supermarket may also be worth visiting from an investment perspective.”
Analysts at UBS recently said their own research indicates the higher level of online grocery use is “likely here to stay, though the dramatic growth will likely normalise”.
Surveys by the Swiss bank’s show 88% of households shopping online say that their grocery spend online will remain the same or increase in the coming weeks, while 71% of those said they will shop online as often or maybe even more after the Covid-19 situation improves.
Shares in the all the large listed grocers were higher on Tuesday, apart from Sainsbury’s.
–Adds broker comment–