Martin Flanagan: Big Four supermarkets bounce back

The big four supermarkets faced cut-throat competition from the likes of Aldi

YOU would have got long odds wagering at the start of December that the big supermarket groups would be among the retailers faring best over the festive period.

The Big Four’s woes were well-chronicled: the cut-throat competition posed by discounters Aldi and Lidl; deflation; management upheaval; overreach in big physical stores; and systemic change in customer behaviour accompanying the onset of austerity.

The latter involves people shopping more online and more in the supermarkets’ convenience stores, sometimes cannibalising the sales at the main shops as a consequence.

But the three major supermarket groups that have so far reported have done much better than many pundits expected. Tesco’s underlying same-floorspace sales were up 1.3 per cent, embattled Morrisons rose 0.2 per and Sainsbury’s posted a 0.4 per cent dip in sales when the City had expected a worse slide. It looks like the relatively new managements at all three companies are getting to grips with what they inherited.

Asda will unveil how it did at Christmas next month, but it is now quite likely that it, too, will have surprised on the upside given the way sectors, particularly the top players, tend to move as a herd.

Undoubtedly, the supermarkets have been the unexpected stars of the Christmas run-up. What about elsewhere on the high street? Some of the obvious standout losers have been the mid-market clothing retailers.

Quite simply, the likes of Next and Marks & Spencer were hit badly by the warmest December on record. Most people do not go out and buy a warm winter coat or jumper when many of them have not even felt it necessary to turn the central heating on at home. In addition, M&S was also impacted by some stock availability problems.

By refusing to plunge into price promotions both Next and M&S helped protect their profit margins, but it was at the expense of sales.

More obvious losers included Poundland, as it seemed more customers bought online (see supermarkets) and therefore there was less opportunity for impulse-buying for household basics as they walked past the stores.

Game Digital, meanwhile, seemed to suffer as customers are not moving up to the next generation of consoles as quickly as expected, or indeed tarting up the software on their older consoles. Perhaps cash-strapped Generation Y has decided it has more pressing financial needs than more electronic accessories.

Surprisingly, the retail success story/public relations minefield that is Sports Direct finally rocked off the rails with warnings about sales in both the UK and Europe.

Department store group Debenhams, a perennial under-achiever, surprised with better-than-expected results, while fashion-plate clothiers Ted Baker and SuperGroup showed millennials are still prepared to spend on looking good.

In all, as usual, a mixed festive bag. «