Tesco stopping the rot as Sainsbury's strong run continues, Kantar says

Sainsbury's was the only one of the Big Four supermarkets to enjoy increased spending in the last three months, though Tesco halved its sales decline, according to data from Kantar Worldpanel.

Morrisons sales continued to slide due to the sale of its convenience stores, though its decline was outdone by that of Asda.

Overall, supermarket industry sales rose 0.5% in the 12 weeks ending 28 February compared with the same period a year ago, the fastest rate of growth since October.

Fierce competition resulted in grocery prices falling 1.6% in the period.

The trend towards convenience store formats continued apace, with sales in larger stores sinking 2.0% as consumers spend less per average trip in these 'big boxes'.

Tesco remains by far the biggest of the Big Four, but its market share dipped to 28.4% from 28.5% as overall sales fell 0.8% compared the the 1.6% decline shown in Kantar data released a month ago.

Sainsbury's share remained at 16.8% as sales grew for the eighth period in a row, up by 0.5%, which Kantar said was the longest run of sales growth for any of the four main retailers since March 2013. Kantar suggested Sainsbury’s has been particularly effective online and in the convenience channels.

Morrisons is also operating fewer stores than last year which continues to contribute to its falling sales – this month down by 3.2% with market share dipping to 10.6%

With its reliance on large stores, Asda continues to be hit hard by the convenience trend with sales falling by 4%.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: “Despite prices continuing to decline, the combination of Valentine’s Day, and consumers stocking up for an early Easter has boosted certain categories. February chocolate sales are up by 13%, cut flowers have increased by 7%, and sparkling wine sales are up by 15%.

"New Year resolutions to eat more healthily don’t seem to have been forgotten, helping fruit and vegetable revenues to grow by 4% despite like-for-like produce prices falling.”

The data was backed up by a report also published on Tuesday by Nielsen, which said Tesco's had registered its lowest year-on-year sales declines for more than two years.

According to Nielsen, Sainsbury’s sales were flat, while Asda endured a 5.0% drop in year-on-year sales during the 12-week period, with Aldi enjoying the highest sales increase of 17.1%, followed by Lidl at 15.7%.

An analyst's take

"The market share data from Kantar and Nielsen reveals a British grocery market that remains in the doldrums," said analyst Clive Black at Shore Capital, "with flat to slightly negative sales in value terms albeit with deflation in the system a better volume picture."

On the gradual self-improvement at Tesco, Black said with the company not planning a fourth quarter trading statement it will next update the market through its preliminary results.

"Whilst we would be surprised to see management materially allow PTP to beat guidance to date, the sales and free cash flow momentum may make for more pleasant reading."

Summing up his take on the market, Black eyed potential for inflationary pressures to return via Brent's ascendancy to $40, but that considerable change continues to be at play within the sector as supermarkets seek to fund price reductions through continued major structural change.

"A good deal more water needs to flow under the bridge but we expect stronger sales densities and cash per square foot to emerge over time, so yielding free cash generation that should permit the rebuilding of solvency ratios and, potentially, more shareholder friendly initiatives," he added. "For the majors, what is clear is that the self-improvement now has also to take place in the absence of a soft underbelly, most notably reflected in the material self-improvement of the Co-op."