If Waitrose’s recent results are any guide life in the supermarket industry seems to have got a bit tougher again since Christmas.

The stockmarket has witnessed a huge rally in the beleaguered food retail sector over the last month or so, based partly on the better noises from Tesco and others about trading at Christmas.

It remains to be seen whether the great Tesco revival at Christmas was much more than the “Black Friday” boost to non-food sales and in the meantime it is worth looking at whether Waitrose is continuing to outperform the market.

Back in September, on the back of the interim results, Mark Price, the ebullient Waitrose MD, insisted that Waitrose’s like-for-like sales performance (about 1% up or flat excluding online grocery) was still running about 5% better than the industry (excluding petrol).

Then in early January, Waitrose announced that it had had a strong Christmas trading period (the five weeks ending Saturday January 3rd), with total sales (excluding fuel) of £728m, up by 7.0% and up by 2.8% like-for-likes (excluding the strong contribution from new stores).

But that overall 5 week outcome over Christmas owed quite a lot to strong growth in week ending January 3rd itself, with total sales (excluding petrol) of £128m 9.0% higher than last year (some 4.8% up like-for-like). Waitrose said in their weekly review that “New Year celebrations and healthy resolutions, supported by half price promotions, delivered a strong first week of sales in 2015”.

Over the 23 weeks to January 3rd total ex-petrol sales were up by 6.2% cumulatively at Waitrose (1.5% up like-for-like, boosted by the strong online grocery sales growth, which was 26% at Christmas).

So how has Waitrose been doing since January 3rd? Well, sales growth eased back in week ending January 10th, despite a “half-price” promotion on more than 400 lines, with total sales 4.6% higher (excluding petrol) than last year (just under 0.5% up like-for-like). And then week ending January 17th was only 3.7% higher (down 0.5% LFL). And week ending January 24th saw total sales only 2.7% higher (down circa 1.5% like-for-like).

Waitrose will reveal on Friday how they did in week ending January 31st (the last week of the 53 week financial year), but there are no prizes for guessing that the trend softened further.

Now, you may recall that a year ago Ocado’s CEO Tim Steiner was complaining at their final results meeting in the City that his friends at Waitrose were pushing irrationally hard on acquiring new online grocery customers (via the infamous “free champagne” promotion) and it was estimated at the time that that was driving over 2% of like-for-like sales growth for Waitrose in January.

Tim Steiner was far too polite at yesterday’s Ocado results meeting to point to the big slowdown in online grocery sales being reported by Waitrose, but the fact is that the big promotional push on online grocery last January wasn’t repeated this year and so Waitrose online grocery sales have been well down in recent weeks.

Incidentally, Ocado should be applauded for revealing that their gross margin slipped by a full 100bps in year ending November at a buying level, but that was partly offset by increased “commercial income” so that the overall Ocado gross margin was only 40bps down at 32.6%. Given the secrecy that surrounds gross margins in the supermarket industry, let’s hope that Tesco give a similarly detailed gross margin analysis with its finals in April.

Before then Waitrose will be unveiling their outlook for 2015 when they announce their profits for year ending January on March 12th (the same day as the Morrisons finals).

Sluggish like-for-like sales volumes, price deflation, soft gross margins and higher operating costs are an unhealthy combination for any retailer and, given the extra investment costs that Waitrose have been bearing, it was surprising in some ways that their first half underlying operating profits were only about 15% down at £135m. The second half will probably have been worse overall so the £310m of operating profit that Waitrose made in 2013/14 is looking a bit remote at this point.

Waitrose will need to look at its operating costs in 2015/16, but, apart from the online grocery blip in January, it is still outperforming the industry in like-for-like sales terms. And once it opens its new “dark store” in Coulsdon next month Waitrose will be able to start pushing its online grocery sales again.

One reason for Waitrose’s outperformance is that its stores are “convenient” for the new time-poor shopper and it is not burdened down by the huge out-of-town hypermarkets of its main rivals…

Ironically, the impressive Waitrose Salisbury store of 55,000 sq ft, with its big non-food department, is much bigger than average for the Waitrose chain, but the recent major revamp there showcases many of the new services and experiences that shoppers can’t get online (eg a wine bar, juice bar and “grazing” areas, plus a big cafe and a Cookery School) and we look forward to seeing how Waitrose roll out the new ideas being trialled in Salisbury.

Meanwhile, if life in the supermarket industry has got a bit tougher again since Christmas, it will be interesting to see what next week’s Kantar grocery market share figures for January (the 4 weeks to February 1st) look like.

  • Nick Bubb has been a leading retailing analyst for over 30 years. He is a well-known commentator on UK retailing and is a founder member of the influential KPMG/Ipsos Retail Think-Tank.