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Ocado sets the pace, with Morrisons stuck in reverse

Sainsbury’s sales shrank 0.6% in the past 12 weeks and Tesco’s were down 0.9%

Ocado Group PLC -

Ocado Group PLC (LON:OCDO) has been the fastest growing grocer in recent months, according to industry data, with J Sainsbury PLC (LON:SBRY) the best performing of the Big Four.

Boosted by a 37% increase in sales of non-alcoholic in ‘dry January’ and a 14% rise in sales of meat substitutes for ‘Veganuary’, research by Kantar found total grocery market tills in the past 12 weeks rang 0.3% higher than this point last year.

READ: Grocers suffer grim Christmas as sales growth slumps to four-year low

Grocery market data was also published by Nielsen on Tuesday, showing a 0.7% in the month, with price inflation calculated at 1.6% to suggest volumes were down by around 1%.

Kantar's reports showed Ocado’s 12-week sales surged 11.2%, increasing its market share by 0.2 percentage points to 1.4%, following a 12.5% increase in the preceding period and keeping its fastest growing grocer since last June.  

“More than half of the online retailer’s sales come from customers in London and the South of England, but its quickest growth is actually found outside of this heartland in the North of England where its sales were 17% higher than the same time last year,” said Kantar’s head of retail and consumer insight, Fraser McKevitt.  

With German discounters Lidl growing 11.1% and larger Aldi up 5.7%, the traditional Big Four continued to lose market share. 

Four flops?

Sainsbury’s saw the least of these losses, with sales shrinking 0.6% in the 12 weeks and its market share down 0.1 percentage point to 15.8%.

Market leader Tesco Group PLC (LON:TSCO) saw its market share drop 0.4 percentage points to 27.3% as sales tumbled 0.9%.

The tale of woe continued for WM Morrison Supermarkets PLC (LON:MRW), with its sales performance again the worst of the four, down 3% as its share drooped to 10.3% from 10.6%.

McKevitt said Morrisons was bucking the trend in the overall grocery market, where generally fewer groceries are being purchased on deal, as the Bradford-based group conducts 47% of its sales through some type of promotion during the past 12 weeks, a 1.3 percentage point increase on last year’s level.

Asda's sales fell 2.2%, with its share down 0.4 points to 14.9%.

Market upbeat

On the stock exchange, share prices of the companies were moving higher on Tuesday, with Ocado, Sainsbury's and Morrisons all up around 1% to 1,256p, 202.92p and 182p, respectively, while Tesco was up 0.5% to 250p. 

Looking at the Kantar and Nielsen data together, analysts at Shore Capital said it "suggests that the current trading environment for the British supermarkets remains subdued, continuing the pattern that emerged from mid-2019".

Looking ahead, ShoreCap's analysts see dampening effect on volumes for grocery and non-food, with "a modicum of benefit" for the overall superstore trade from more favourable comparatives and possibly summer boosts like UEFA 2020.

"With the structural attack on operating costs continuing, noting reasonably significant announcements from Asda, Morrisons and Sainsbury's in January on people, alongside sustained capital discipline, then we continue to see a rational, somewhat constrained but cash flow disciplined sector, where free cash flow credentials can be good for investors."

   --Adds share prices and broker comment--

Quick facts: Ocado Group PLC

Price: 2817 GBX

LSE:OCDO
Market: LSE
Market Cap: £21.07 billion
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