Summary

• In the four weeks to 4 October 2020, the UK grocery sales rose 6 per cent YoY, as per a recent report from a consultancy firm Kantar.
• Britishers consumed more food and drinks at home after the recent coronavirus restrictions imposed by the government.
• In October 2020, the sale of alcohol is likely to generate £261 million more for the UK supermarkets
• The UK supermarkets do not face the challenges of supply chains as shoppers avoided stockpiling.
• Share prices of Tesco and Sainsbury likely to be impacted positively in the near term.

After the recent industry data suggesting a rise in British grocery sales for September 2020, market experts indicated that the share prices of two of the leading British supermarkets such as Tesco Plc (LON: TSCO) and J Sainsbury Plc (LON:SBRY) could perform well in October 2020.  On 14 October 2020, at 12.31 PM, the Tesco’s was trading at £224.50 up 0.99 per cent from its previous day’s close of £222.40. On the same day at 12.45 PM, J Sainbury’s stock (LON:SBRY) was trading at £200.80 down 0.84 per cent from its previous day’s close of £200.80.

Till date this month, the shares in both the supermarket chains rebounded by around 5 per cent. On a year to date (YTD) basis, stocks of both the retail chains presented a negative return on price at approximately 13 per cent.

The UK grocery sales increased mainly because the consumers started preparing for the stricter restrictions imposed by the government to check the recent spike in Covid-19 infections. As per a recent report released on 13 October 2020 by Kantar, a data, insights, and consulting company, the UK grocery sales surged 10.6 per cent year-on-year (YoY) in the four weeks to 4 October 2020. The increase in sales could be attributed to the fact that Britishers consumed more food and drinks at home, given the recent coronavirus restrictions imposed by the government. The data by Kantar showed that in October 2020, the sales of alcohol are expected to generate £261 million more for the UK supermarkets as compared to October 2019. The British government has recently announced a 10 PM curfew for pubs, restaurants, and bars.

However, the consultancy firm did not present substantial proof of stockpiling being undertaken by Britons. It is to be recalled that the stockpiling done during mid-March 2020, just before the first lockdown in the country, led to considerable problems related to supply chain for the supermarket chains.  

Key highlights from Kantar’s report

• During the 12 weeks to 4 October 2020, there was a 9.4 per cent rise in take-home grocery sales.
• Over the latest four weeks, sales were up by 10.6 per cent, acceleration from last month.
• Due to recent rise in Covid-19 infections, latest measures on opening hours for the hospitality sector, and end of eat out to help out scheme, customers are increasingly opting to eat and drink at home.
• Because of the 10 PM curfew imposed on bars and restaurants, alcohol sales were £261 million more than 2019.
• In September 2020, shoppers did not engage in stockpiling of goods at a national level.
• Busiest days since mid-March 2020 included day between 21 and 27 September, with 107 million trips recorded.
• Before first national lockdown, this number was around 175 million.
• Increase in online sales during September 2020 was up 76 per cent on a year ago as one in every five households chose to shop groceries via the internet.
• The 12-week ending sales at Ocado grew by around 42 per cent. The company added 22,000 customers. Ocado recently formed a partnership with Marks & Spencer.
• With overall sales increasing by 8.9 per cent, Waitrose remained as a fastest growing online retailer for this month. The company also increased sales through its physical outlets.
• For the second period in a row, Tesco maintained its market share year-on-year. The supermarket held around 27 per cent market share, with growth in sales of around 9 per cent.
• Asda got new owner in October 2020. Its sales grew by 5.4 per cent but market share fell to 14.4 per cent.
• Market share at Morrisons was up by 0.2 per cent to reach around 10 per cent and a growth of 11.5 per cent.
• Sales at Sainsbury’s were up by around 7 per cent, while it recorded a market share of approximately 15 per cent.

Impact of the ‘eat out’ scheme

According to an earlier study by Kantar, the UK government’s scheme, ‘eat out to help out’, wiped almost £155 million from UK grocery sales in the same month. This wipe out was a result of people eating fewer meals at home and spending lesser on shopping from the supermarkets in the four weeks to 6 September 2020 as compared with July this year. A large number of Britishers availed of the scheme that aimed to support the restaurants facing challenges of the coronavirus-led crisis. The scheme ran for the entire month of August this year and footfall at the eateries increased considerably. The scheme concluded on the bank holiday, when eating out accounted for 2.5 times additional share of expenditure by the consumers as compared to pre-pandemic average.

Financial updates: Tesco Plc

In its interim results for 2020/21 announced on 7 October 2020, Tesco reported group sales of £26.7 billion as compared to £25.0 billion in H1 2019/20. In H1, while the company’s revenue was £28.7 billion (2019/20: £28.5 billion), the profit before tax (PBT) was £551 million (2019/20: £428 million). The sale of foods was reported to be up 9.2 per cent. Its online delivery capacity was doubled and reached 1.5 million slots per week, serving around 674,000 customers who were supposedly vulnerable. To support its online segment, Tesco created 16,000 new permanent roles in August 2020. In support of the kickstart programme, the company is creating 1,000 work placements for young people. In alignment with its payout policy, Tesco announced a dividend of 3.20 p, 35 per cent of 2019’s full year dividend payout. 

Stock performance: Tesco Plc

Tesco is one of the biggest supermarkets in the UK that operates both online and physical outlets. On 14 October 2020, at 12.31 PM, the company’s stock (LON: TSCO) was trading at £224.50 up 0.99 per cent from its previous day’s close of £222.40. The 52-week low high range was recorded as 210.00 and 258.90.

With a market capitalisation (Mcap) of £21,780.74 million, the stock provided a negative return on price, which was minus 13.06 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 6,070,924.

Stock performance: J Sainsbury Plc

J Sainsbury Plc is one of the leading retail groups in Britain having a portfolio of strong brands. The company provides easy and affordable access to healthy food, stylish homewares, quality clothes, general merchandise, financial services, and latest technologies.

On 14 October 2020, at 12.45 PM, the company’s stock (LON:SBRY) was trading at £200.80 down 0.84 per cent from its previous day’s close of £200.80. The 52-week low high range was recorded as 174.95 and 235.80. With a market capitalisation (Mcap) of £ 4,503.44 million, the stock provided a negative return on price, which was minus 12.75 per cent on a year to date (YTD) basis. The total volume of shares traded at the time of reporting was recorded at 1,518,526.