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Highlights
- The grocery inflation in the UK supermarket rose to 14 months at 2.1% in October 2021.
- Specific product categories like savoury snacks, crisps, and canned drinks reported the fastest growth in prices amid supply chain issues.
The grocery inflation in the UK rose to 14 months high mainly due to supply chain disruption and shortage of HGV drivers in the country. The UK supermarkets reported a 2.1% rise in grocery inflation in October 2021, the highest level since August 2020 as per the latest survey by data analytics and brand consulting firm Kantar. In addition, the take-home grocery sales in the UK declined by 1.9% over the 12 weeks to 31 October 2021.
2 Supermarket Stocks to Buy amid Rising Grocery Inflation
Certain product categories like savoury snacks, crisps, and canned drinks reported the fastest growth in prices amid supply chain issues. Kantar also said that supermarket chains are pushing towards price hikes to offset the rising input cost inflation due to transport, wages, energy prices. However, despite price inflation, yearly supermarket sales remained higher at 7.3% compared to 2019. Also, it stated that the trend of fewer but bigger trips to supermarkets is set to stay. However, online grocery sales continued to shine despite the ease of restriction. Digital sales make up 12.4% of the total grocery market.
The data also showed consumers are stocking up festive items ahead of Christmas. Most importantly, the overall market share of the big four supermarket chains remained stable during the period.
Let us discuss two FTSE listed supermarket stocks that are in focus:
Tesco Plc (LON: TSCO)
FTSE100 listed company operates a chain of supermarkets in the UK and other countries. It has the largest market share amongst all the UK-based supermarket chains. The company has also diversified its business into different segments like retail banking and insurance services.
The company reported total revenue of £27,331 million, a rise of 3% in the 26 weeks ended 28 August 2021, while its adjusted operating profit rose by 41% at £1,458 million. The company has marginally grown its market share in the UK market due to strong consumer demand and consistently good digital platform performance. Following the strong first-half performance, the company has declared an interim dividend of 3.20p per share and announced a £500 million share buyback program for its shareholders.
Tesco Plc current market cap is £21,184.2 million, while its current dividend yield stands at 3.4% as of 10 November 2021.
J Sainsbury Plc (LON: SBRY)
The company operates a network of over 600 supermarkets and 800 convenience stores and also has a presence in major online channels. It employs close to 185,000 people in the UK and Ireland.
The company reported growth in revenue during the first half ended on 18 September 2021. The total group revenue stands at £15,724 million, a rise of 5.3%, while its profit before tax was £541 million. The business benefited from higher in-home grocery consumption. Also, the company has undertaken a three-year cost reduction program to reduce retail operating costs to sales ratio by 200 basis points.
J Sainsbury Plc current market cap is £6,745.7 million, while its current dividend yield stands at 3.7% as of 10 November 2021.
