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Don't Be Fooled by Lull in U.K.'s Supermarket Storm

Shares in Tesco, the U.K. market leader, have been buoyed roughly 10% this month by signs of a sector-wide recovery.
ENLARGE

Shares in Tesco, the U.K. market leader, have been buoyed roughly 10% this month by signs of a sector-wide recovery.


Photo:

Bloomberg News

By

Stephen Wilmot

Updated Sept. 26, 2016 9:26 a.m. ET

Headlines trumpeting a return to growth for embattled U.K. supermarkets are best ignored. The price war isn’t over yet.

Shares in Tesco,
TSCDY


-0.43
%




the market leader, have been buoyed roughly 10% this month by signs of a sector-wide recovery. First, local competitor WM Morrison posted much better-than-expected results for the quarter through July. Then, last week, data provider Nielsen noted a second consecutive month of year-on-year growth in both till receipts and the number of items sold, mainly because Britons made more small shopping trips than the previous year.

But the bounce looks fragile. The U.K. and Ireland arm of Aldi, one of the two German supermarkets that have fractured the old oligopoly in British grocery, announced a £300 million store refresh alongside its 2015 accounts Monday. An expansion in chilled space, to name one change, shows how the privately-owned company continues to push out of its old discounter category into the mass market. Aldi also plans to up its store count by about 10% in 2017.

It remains unclear how Wal-Mart
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0.11
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’s Asda will react to its debilitating market-share losses of the two years. The chain has a new chief executive who will be under pressure to revive growth. Price cuts seem likely.

Another short-term fillip: Unusually sunny weather seems to have encouraged impulse purchases in the U.K. this summer as Britons fired up the grill more often. But the competitive challenges haven’t changed—and may well get worse. It is too soon to call an end to Britain’s shopping aisle wars.

Write to Stephen Wilmot at [email protected]

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Don't Be Fooled by Lull in U.K.'s Supermarket Storm Reviewed by on . ENLARGE Shares in Tesco, the U.K. market leader, have been buoyed roughly 10% this month by signs of a sector-wide recovery. Photo: Bloomberg News By Stephen Wi ENLARGE Shares in Tesco, the U.K. market leader, have been buoyed roughly 10% this month by signs of a sector-wide recovery. Photo: Bloomberg News By Stephen Wi Rating:
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