Tesco doubles six-month profit

Tesco says it has “outperformed” the grocery sector, with first-half sales and profit ahead of expectations.

Britain’s biggest supermarket chain recorded sales of £27.3bn for the six months to August, a rise of 2.6% compared to the same period last year.

UK like-for-like sales were up 1.2%, although Tesco said that some of the recent sales growth was likely to “fall away” in the coming months.

Half-year profit before tax doubled to £1.1bn from £551m a year ago, boosted by a reduction in pandemic-related costs.

The company said that its supply chain had demonstrated “resilience” despite lorry driver shortages, and product availability in stores remained good.

Chief executive Ken Murphy told journalists on a conference call that there will be “bumps in the road” in the run-up to Christmas but overall the company is “in good shape” for the crucial festive period, BBC News reported.

Based on its strong first-half performance, Tesco has increased its full-year outlook and now expects operating profit for the year of between £2.5bn and £2.6bn — up from an earlier forecast of £2.3bn.

Tesco is the UK grocery market leader with a market share of 27%.

Leisurewear demand boosts sales at Primark

Primark saw strong sales of “comfort wear” this summer, but lower than expected sales overall.

The discount chain’s owner, Associated British Foods plc (ABF), said that sales in late June and early July were affected by the “rapid and significant increase” in the number of people required to self-isolate following contact tracing alerts from the NHS app.

Caution among consumers during that period had an impact on high street footfall and Primark’s like-for-like sales were down 24% compared with last year. However, as the self-isolation rules were eased there was a consistent improvement in sales.

In particular, shoppers have been opting for leisurewear such as leggings and cycle shorts, and seam-free matching separates for women.

And Primark has managed to maintain its market share compared to the same period two years ago, despite competition from fast fashion retailers that — unlike Primark — offer online sales.

ABF’s other businesses include Silver Spoon, Allied Bakeries, Twinings and Ovaltine.

Adjusted operating profit in its fourth quarter ending 18 September 2021 for both Primark and the food businesses is anticipated to exceed the company’s earlier expectations.

“Primark’s operating profit margin in the period was strong despite lower than expected sales and Sugar will deliver a much-improved profit year-on-year,” ABF said.

M&S set to close up to 30 stores

Marks & Spencer has reported a loss of £201m in the 52 weeks to 27 March 2021, down from a profit of £67m in the previous year.

The results reflect a year impacted by the Covid-19 pandemic, with clothing and home sales down 31%. Performance improved in the second half as online growth made greater inroads into the store sales decline, M&S said.

Food sales increased thanks to the retailer’s online delivery tie-up with Ocado, which added £78m of profit.

The chain currently has 254 full-line stores, selling clothing and home ranges as well as food, and is aiming to cut this number to around 180.

As part of its turnaround plan, about 30 stores will close over the next decade and another 80 will be relocated to a “food only” store or another full-line store in a better location, or merged with nearby shops.

The 137-year-old group will also open 17 new or expanded full-line stores over the next two years, including a number of former Debenhams sites.

“We are committed to stores and believe they can be a true source of competitive advantage,” chief executive Steve Rowe told investors and journalists on a conference call.

“But they need to be the right stores, in the right location, with the right services.”

Footfall rockets as shops reopen

Shoppers have flocked back to high streets in England and Wales as shopsreopened after three months of full lockdown.

As of Monday, non-essential shops, hairdressers, salons, pubs,restaurants, outdoor attractions and gyms reopened in England.

People living in Wales can also now visit non-essential shops and travelacross the border to other areas of the UK.In the first few hours of trading, footfall in shopping centresincreased by nearly 340% compared with a week ago, according to thelatest data from Springboard.

Meanwhile, footfall on high streets was up 233% and retail parks saw a58% week-on-week rise.The chief executive of the British Retail Consortium, Helen Dickinson,told Sky News that around £30bn of in-store sales have been lost duringthe Covid-19 pandemic so far and shops were “desperate to welcome theircustomers back”.

Some pubs and hairdressers opened at midnight, when the lockdown ruleswere officially eased.

And there were queues outside shops early in the morning as high streetretail opened up.

Primark is among the stores extending opening hours from 7am to 10pm tohelp prevent overcrowding.

Older shoppers returning to the supermarket

Households across the UK made 13 million more supermarket trips in March compared with the previous month, and there are signs of growing confidence among older shoppers in particular.

New figures from market research firm Kantar reveal that in-store grocery spending for the last four weeks is down by 3.0% versus the same time last year, when people were stocking up ahead of the first national Covid-19 lockdown.

But compared with pre-pandemic levels, grocery spending remains considerably higher – boosted by the continued restrictions on dining out. In the 12 weeks to 21 March 2021, the average household spent an extra £134 on take-home groceries compared with the same period two years ago.

The figures also show that supermarkets have seen a slowdown in online growth this month as more shoppers return to physical stores. While online sales for March were 89% higher than a year ago, the channel’s share of the market dropped back to 14.5% from the record of 15.4% in February 2021.

Notably, 143,000 fewer over-65s placed digital grocery orders in March.

“Now largely vaccinated, this age group increased its trips to bricks-and-mortar outlets by 6.8% – more than double the national rate,” Kantar said.

Lockdowns wipe out £2bn of sales at Primark

Covid-19 lockdowns have cost Primark £2bn in lost sales, according to its parent company, Associated British Foods.

The discount fashion retailer does not sell products online, which meant that it was unable to continue trading when local restrictions forced its stores to close.

It also has no plans to offer a click-and-collect service during the coming lockdown in England.

A spokesperson for Primark quoted by BBC News said: “Although we will look at alternative business models from time to time, there are no immediate plans to trade online.”

The UK first went into lockdown at the end of March and “non-essential” retailers were permitted to reopen in June. Since then, Primark has seen “robust” sales of around £2bn.

The retailer’s UK like-for-like sales are down 12% from a year ago. It has seen slower sales at its large city centre stores because of fewer commuters and tourists, but sales at retail park locations are higher and shopping centres and regional high street stores are broadly in line with last year.

George Weston, chief executive of Associated British Foods, has called for extended store trading hours in December to help retailers offset the impact of the latest round of lockdowns in the UK.

“In some locations we could even open 24 hours. We know the demand is going to be there,” Weston said, as quoted by the Financial Times.

“It would be easier to limit numbers in stores if we could say to people ‘you can come back at these other times’,” he added.

Supermarkets struggle amid CO2 shortage

A shortage of carbon dioxide is causing problems in the food retail sector, according to BBC News.

The gas is used to carbonate drinks and is also deployed to stun animals prior to slaughter. A shortage of CO2 is impacting the supply of beer, soft drinks and meat to supermarkets.

The Food and Drink Federation chairman Ian Wright has said supplies are not expected to return to normal for one week, and in the meantime “choice will be eroded.”

Wright said: “We will see fewer chicken dishes, fewer pork and bacon dishes. We’ll see probably less carbonated drinks and certainly bakery and other things that benefit from what’s called modified atmosphere packaging, which is plastic packaging with a tray underneath and a dish of food in them.”

Baking brand Warburton’s has blamed the gas shortage for halting production at two of its four plants, while a number of other companies have admitted their production has been disrupted.

The British Retail Consortium said: “We are aware of specific pressures in some areas such as carbonated soft drinks, beer, British chicken and British pork but the majority of food products are unaffected and retailers do not anticipate food shortages. However, it is likely that the mix of products available may be affected.”

A spokesperson for the Department for Environment, Food and Rural Affairs said: “They said: “We have been assured CO2 producers are working as fast as they can to get plants up and running again, with CO2 production set to start very shortly.”

Costa sees sales fall 2% on 2017

Costa coffee has reported a 2% fall in sales compared to 2017 for the first quarter of 2018, according to BBC News.

The coffee chain said total UK sales were up 5.2% following the opening of new stores, but like-for-like sales were down.

Parent group Whitbread pledged in April to demerge Costa from the group. Early morning trading in London saw the company shares rise 1% to £39.36.

Whitbread head Alison Brittain said: “Our stores remain highly profitable and deliver an excellent return on capital.”

A statement from the company said: “The UK like-for-like sales decline resulted principally from footfall weakness in traditional shopping locations, whereas travel locations continued to show good growth.”

Recent months have seen a number of well-known UK chains struggle to cope with challenging economic circumstances and online competition. Brands including Marks & Spencer, House of Fraser, Mothercare, New Look, Byron, Jamie’s Italian and Prezzo have announced plans to close stores.

Companies Maplin, Poundworld and Toys R Us have entered administration.

Poundworld founder considering return to ailing retailer

Struggling retailer Poundworld may not vanish from the High Street after all, following news that its founder is considering purchasing some of the stores, according to BBC News.

The discount retailer was founded by Christopher Edwards in 1974 and sold it for £150m to TPG Capital in 2015. Edwards believes the chain could be saved with a fresh management team.

Poundworld called in Deloitte to act as administrators after a failed bid to sell the company to R Capital. The chain has been struggling like other retailers with a weaker pound and the growth of online shopping.

Edwards said the brand”s management had “not adjusted” to rising price pressure and had therefore “lost their profit margin.” The management’s decision to introduce multiple price points also attracted criticism from Edwards.

Speaking to Radio 5 Live, Edwards said: “B&M Bargains hasn’t gone, Home Bargains hasn’t gone, Wilko hasn’t gone. So for every store that goes down others are still thriving. It’s about management style, that is what makes the business work.”

Edwards said he was “sad and emotional” about the chain’s collapse and would decide whether to get involved within the next two weeks.

Suppliers worried about Asda/Sainsbury’s merger

Suppliers to supermarkets Sainsbury’s and Asda have expressed concern that the merger of the two chains could lead to increased pressure on price, according to BBC News.

Mike Coupe, chief executive of Sainsbury’s has said that the merger would enable the resulting company to cut prices on everyday products by around 10%. Suppliers say they are worried they will carry the cost of those price reductions.

Austin Sugarman, head of coffee supplier Fine Foods International, said: “There will be plenty of losers from this. If suppliers are going to have to come up with the savings, then we’ll see consolidation in the supply base.”

Sugarman added: “That means closing factories, that means losing people and it means effectively less choice for consumers.”

Industry bodies have said the merger would make trade challenging for smaller suppliers who are already struggling to cope with increases in the minimum wage and the auto-enrollment of pensions, as well as the devaluing of the pound following the Brexit referendum.

Gordon Polson of the Federation of Bakers said: “We already operate in a very competitive retail environment. We just don’t see possibly how our products could be reduced any further.”

Sainsbury’s said: “At this stage, we are still in the early phases of our plans but we believe this is a great opportunity for suppliers as they will be able to make their supply chains more streamlined, to develop differentiated product ranges and to grow their businesses as we grow ours.

“We are also actively investing in small suppliers – we are recruiting a team which is dedicated to working with smaller and distinctive suppliers to help them bring new products to market and to handhold them through this process.”