- Supermarket sales drop below £100bn
- First time grocery revenues have dipped below that figure since 2010
- Major grocers’ sales fell 3.1% to £99bn, data shows
Supermarket sales have fallen below £100bn for the first time since 2010 as the ongoing price war eats away at grocery revenues.
Sales among the major grocers dropped 3.1% to £99bn during the second quarter, according to The Share Centre’s Profit Watch UK study.
Overall revenues of UK PLCs in the FTSE 350 declined 2.2% to £341.7bn in the same three-month period.
The big four grocers – Tesco, Sainsbury’s, Asda and Morrisons – have been adjusting to every day low price models in a bid to fend off the onslaught of discount duo Aldi and Lidl, which have wooed their customers and eaten into market share.
The arrival of Amazon Fresh in the UK is set to heap further pressure on mainstream supermarket operators, after the etailer pledged to focus on a broad range, low prices, high levels of customer service and speedy fulfilment.
Sainsbury’s is already looking to hit back with its imminent acquisition of Argos owner Home Retail Group, as boss Mike Coupe bids to drive its delivery capabilities and better compete with Amazon and John Lewis in non-food.
The Share Centre data added that £89.7bn was written down in the last quarter, the lowest level since 2008.
Last year Tesco wiped £5bn off the value of its property, but pre-tax profits rebounded from a loss of £6.2bn in 2015 to a £162m profit.
However, while grocers’ sales across the sector dropped during the quarter, many UK companies are expected to benefit from the slump in the pound, since about 40% of listed business declare revenues in US dollars.
Firms with large overseas operations and high levels of exports, including B&Q owner Kingfisher, are also well-placed to benefit.
Helal Miah, investment research analyst at The Share Centre, said intense price competition drove a tough year for UK supermarkets, but said companies exposed to UK consumer spending enjoyed a boost from a “burgeoning” UK economy.
However, he warned that the lift would be short-lived as uncertainty surrounding Britain’s vote to leave the EU dampens economic growth.
“The implications of the economic slowdown will mean lower demand for sectors such as house builders and retailers, while the travel industry is already feeling the effects,” Miah said.