B&M Taking Steps To Boost Performance After Another Tough Quarter

Discounter B&M is forecasting that its annual profit will now come in above the midpoint of its £605m-£625m guidance range, buoyed by sales from new stores and robust French operations, with cost cuts also helping it mitigate cautious demand from customers in the UK.

The retailer’s share price spiked as much as 7.5% in early trading as investors took solace in the upgrade after it cut its profit forecast in February, having already narrowed the range previously. B&M shares have plummeted over the last year after a series of profit warnings.

In a brief trading statement today, B&M revealed that its group revenues over the 12 months to 29th March had risen 3.7% to £5.6bn after a slightly stronger performance in the final weeks of the year.

In the fourth quarter, like-for-like sales at B&M UK fell 1.8% when the distorting effect from the Easter weekend falling in the final week of the previous year is removed. This was an improvement on the 2.8% decline recorded over the Christmas period.

The group noted that UK general merchandise sales values and unit volumes in the quarter increased on both a like-for-like and total basis, driven by garden, toys, paint and stationery. However, FMCG delivered negative like-for-likes with “actions” underway to improve performance.

B&M stated that gross margin was “robust” in the UK, helped by total volume growth and relatively stronger trading in general merchandise categories.

Operating costs increased by around 6% but were partly mitigated by productivity gains.

B&M opened 45 gross new stores in the UK during the year, driving the chain’s total annual revenues up 3.8% to £4.48bn. The group is planning 45 more openings in the year ahead.

At B&M France, fourth quarter like-for-like sales rose 3.2%, with total revenues across the year growing 7.8% to £543m after the addition of 11 new stores.

At Heron Foods, total sales rose 1.5% in the final quarter but were down 0.6% across the year despite the opening of 14 new stores.

Meanwhile, B&M stated that it was making progress on finding a new Chief Executive to replace Alex Russo, who will retire at the end of this month. An announcement is expected in the coming weeks, with David Potts, the former CEO of Morrisons, reported to be one of the frontrunners.

NamNews Implications:

• Given that market expectations will have been factored into its share price, today’s uptick patently reflects shareholder satisfaction with performance.
• The key will be B&M’s ability to maintain this momentum…
• …especially the like-for-like element.
• Opportunities for suppliers to help lift new store performance…
• …by better-than-average sales levels.

Booths Introducing Loyalty Pricing

Upmarket northern grocer Booths is set to become the latest retailer to introduce loyalty pricing.

According to trade publication The Grocer, members of the Booths rewards scheme will have access to discounted prices on around 300 of the chain’s own-label lines. Cardholders will also get access to “permanent” promotions and offers, including its ‘Three for £15’ meat deal and 10% off when purchasing four bottles of wine.

Booths’ Managing Director Nigel Murray told The Grocer that it had decided to introduce the “fairly fundamental changes” as it wanted to do more to reward its most loyal shoppers. Currently, cardholders are rewarded with 5% back on the purchase of selected items in the form of paper vouchers, which they can then redeem in stores.

He noted that the new mechanism would be more relevant to the millions of visitors to the Lake District who use its two stores in Windermere and Keswick.

“They are not frequent customers, but they are regular customers as they come to us every time they come to the Lake District,” he said. “So how do we reward those people instantly when they come to store?”

Murray highlighted that running a paper-based voucher system was also very expensive.

He told The Grocer that the loyalty pricing would be rolled out to Booths’ 26 stores “imminently”.

During its last financial year, Booths delivered improved results after recovering from the impact of high inflation and the cost of living crisis.

NamNews Implications:

• The key is ‘instant rewards’.
• (key to loyalty-data optimisation)
• Not because rivals are doing so…
• …but because customers respond to a felt need.
• With evidence in repeat purchase.

Asda Names Creative And Media Agency Partners

 

Asda has appointed Lucky Generals and Spark Foundry as its creative and media agency partners following a pitch process.

Advertising firm Lucky Generals will be Asda’s new creative agency partner for both its supermarkets and its George fashion & home brand.

The struggling grocer noted that it had been impressed by the agency’s ideas to show how Asda can deliver on its key mission of “delivering uncompromised value for hard-working families”. Lucky Generals will begin transitioning into the role in May.

Meanwhile, Asda is retaining Spark Foundry as its media agency, continuing an eight-year partnership.
“We set off on this journey to ensure we have the right partners in place to support Asda’s objectives to offer uncompromising value to our customers and with a key focus on the ‘Asda DNA’ that really resonates with our customers,” said Adam Zavalis, VP of Marketing at Asda.

“We are really pleased to have identified Lucky Generals as our new creative partner whilst retaining Spark as our media partner and look forward to working together to bring Asda’s personality to life for our customers.”

Cressida Homes-Smith, the CEO at Lucky Generals, added: “This is a pivotal moment for two of Britain’s greatest consumer champion brands – brands that deserve to be right in the heart of the nation at a time when things in Britain are genuinely tough.

“We love the palpable sense of energy, enthusiasm and determination the Asda and George bring, and there has been a natural and positive relationship between us since the very first meeting. We’re genuinely grateful for the honour and opportunity and can’t wait to get our sleeves rolled up and put these brands back where they belong.”

NamNews Implications:

• Asda now needs to hit media hard & fast…
• …in what will hopefully be a ‘re-education’ of its public…
• …given that a ‘new-education’ message would probably take longer than Asda has available.
• Fingers crossed…

Aldi Surpasses Asda in Food And Drink Sales Amidst Turnaround Challenges

Asda’s turnaround has suffered a blow after new figures show that Aldi has overtaken the struggling supermarket in terms of food and drink sales.

Kantar data seen by The Telegraph shows Aldi accounted for 10.6% of food and drink sales across all supermarkets in the 12 weeks to 23 March – beating Asda’s market share, which slipped from 10.5% to 10.4%. Aldi had a 10.1% market share in the previous period, with its gains in recent weeks driven by higher sales of fresh poultry, fish, eggs and fruit.

The figures, which the newspaper said are distributed privately to supermarkets, do not include sales of alcohol, toiletries, household goods, and beauty items. Including these, Asda is still the third-largest grocer, with a share of 12.5%. However, this is down from the 14.8% share it held when it was acquired by TDR Capital and the Issa brothers in 2021.

Meanwhile, supported by its store expansion programme, Aldi has continued to make gains, with its overall share recently hitting 11.0% for the first time after growing at its fastest rate in over a year.

Aldi overtook Morrisons as the fourth-largest grocer in September 2022. In the unpublished figures from Kantar, The Telegraph noted that Morrisons had slipped further down the rankings on food and drink sales. It sold less food and drink than Lidl in the period, with the fast-growing discounter holding a 7.7% share compared to Morrisons’ 7.6%.

In March, Asda’s Allan Leighton: .. Asda prepared to take a significant hit to its profit to finance a shift to a new low ‘Asda Price’ by the end of 2026 in a bid to recover lost market share. Shares in Tesco, Sainsbury’s and M&S tumbled on fears of a major supermarket price war.

Leighton said Asda had a lot of ground to make up, i.e. turnaround efforts would take years.

Re share share data, an Asda spokesperson said the Kantar data was “highly selective and does not include key grocery categories such as alcoholic drinks, pet food, laundry, household products and toiletries”.

“We have a clear plan to deliver outstanding value for our customers, and since relaunching Rollback at the end of January, we have reduced prices on a third of our entire range.

“This focus on lowering prices for hard-working families is reflected in the latest and most widely followed Kantar data, as Asda inflated behind the discounters and clearly maintained its position as the third-largest supermarket in the UK.”

NamNews Implications:

• Aldi achieving a No.3 position in any part of the UK trade is a pivotal moment.
• And doing so in food & drinks makes it top-of-mind.
• These food & drinks stats present a dilemma for Asda:
• Fight it out with the discounters on food & drink.
• Or do battle where Asda are ahead: alcohol, toiletries, household goods, and beauty items. Morrisons’ slippage will not go unnoticed either…
• As always, suppliers will have to take a stance re where these changes are heading…
• …and adjust their trade strategies accordingly.

Tesco Expected To Post Strong Annual Results And Address Asda Price War Challenge

Tesco is set to reveal strong sales and profit figures when it releases its annual results on Thursday, with investors keen to hear how the UK’s leading grocer plans to respond to Asda’s drive to slash prices to become 5% to 10% cheaper than its rivals.

Last month, Asda’s Chairman Allan Leighton said that the business was prepared to take a significant hit to its profit to finance a shift to a new low ‘Asda Price’ by the end of 2026 in a bid to recover lost market share. The statement led to shares in Tesco, Sainsbury’s and M&S tumbling on fears of a major supermarket price war.

However, most analysts think that scenario is unlikely, noting the increasing cost pressures retailers and their suppliers face. Recent industry data from Kantar shows that grocery price inflation in the UK rose slightly to 3.5% last month, with shoppers turning to promotions to save money.

Market watchers have also questioned whether Asda has the financial firepower for a sustained price war, given that its majority owner, private equity group TDR Capital, is not putting additional equity into the business.

Meanwhile, Tesco and Sainsbury’s have stronger balance sheets than Asda.

Tesco’s results “will be an important staging post to test the mood music of the market leader on such matters, we sense a mature, resolute and professional approach will ensue,” said renowned Shore Capital analyst Clive Black.

Analysts at Bernstein looked at over 500 own-label products that Tesco price matches with Aldi and compared them with Asda. “Tesco and Aldi do not massively need to react. They are winning on price perception,” it found.

Tesco has guided for an annual retail adjusted operating profit of around £2.9bn, up from £2.76bn last year, supported by robust sales growth in its core business.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Growth in the UK and Europe helped to offset declines in its wholesale business, Booker. It’s a competitive space, but its improving proposition saw Tesco record its highest market share since 2016. Investors will be keen to see this trend continue when it reports full-year results.”

Analysts expect Tesco to flag further profit growth in next 12 months despite costs (higher national insurance contributions, national minimum wage, new packaging levy.

NamNews Implications:

• The added uncertainties of Trump tariffs…
• …gives retailers the ’excuse’ to wait and see outcomes.
• i.e. postpone any plunge into a UK price war, if intended.
• Besides, whilst Asda management may have permission to make threats…
• …this may not include the funding of a prolonged price war.
• Meanwhile, retailers with strong balance sheets may now want to preserve their ‘wealth’ following Trump’s announcements.
• This says a lot: “Tesco and Aldi do not massively need to react. They are winning on price perception”.

Rival Supermarkets Could Be Given Permission To Challenge Plans For New Aldi And Lidl Stores

The traditional supermarket multiples could be granted fresh powers to open more stores in areas dominated by Aldi and Lidl.

The Telegraph: The Competition and Markets Authority (CMA) is reviewing the rules that restrict major supermarkets from blocking their rivals from opening stores nearby.

To protect competition for shoppers, the regulator’s restrictive land clauses mean supermarkets must allow rival stores to open nearby without opposition.

However, this order only applies to Tesco, Sainsbury’s, Morrisons, Asda, Waitrose, Marks & Spencer and Co-op. Aldi and Lidl are exempt, meaning they have been able to grow their number of stores without having to comply with the rule.

Under the regs, the 7 UK supermarkets are blocked from having contractual clauses in their store deals, blocking rivals having stores in the same area. All of them have been forced to review contracts to comply with the order, which the CMA said is designed so that “shoppers have more choice and so benefit from a wider range of groceries and access to cheaper prices”.

Supermarket bosses have become increasingly frustrated over what they claim is an unfair playing field with Aldi and Lidl, not subject to the same restrictions based on 2010 legislation

Discounters hold nearly 20% of UK grocery market and both plan hundreds more stores.

The report said that Aldi and Lidl have been using the same restrictive clauses to block competitors from opening stores near them in retail parks.

Richard Walker, the Executive Chairman of Iceland, said last year that the discounters were using “legal tricks” to prevent rivals from moving into out-of-town shopping parks.

Officials have been asked to consider whether the rules should now include Aldi and Lidl or whether they should remove the bans for all supermarkets.

Supermarket insiders told the newspaper that they were hopeful that the competition regulator would decide to axe the restrictions altogether, given Labour’s push to cut red tape.

A CMA spokesperson is quoted as saying: “The Groceries Market Investigation (Controlled Land) Order plays an important role in maintaining competition between supermarkets, which is crucial to the finances of families across the country.

“We are aware of concerns that the Order should cover more supermarkets due to changes in the groceries sector, and we always keep this under review to ensure a level playing field.”

NamNews Implications:

• Inevitable that the government/legislation trails behind market realities.
• Inevitable that discounters’ growth in market share would reach this point.
• Inevitable that this planning clause includes discounter contracts…
• …to avoid the free-for-all that would inevitably result from removing the bans for all supermarkets.

Aldi Hits British Supplier Target Earlier Than Expected

Aldi has met its long-term commitment to increase spending with British suppliers.

In 2020, the discounter pledged to spend an additional £3.5bn a year with British suppliers by the end of 2025. However, it announced today that it has already surpassed this target, spending more than £14bn with UK businesses in 2024.

Giles Hurley, Chief Executive Officer of Aldi UK, commented: “British suppliers have always been at the heart of our business. From homegrown apples to Wagyu beef, and from crisps to cocktails – our range is full of incredible British products sourced from our amazing suppliers right here in the UK.

“We remain committed to buying British wherever we can, and surpassing our annual spending target ahead of schedule is a testament to that. By working closely with British businesses, we continue to champion local suppliers and support the UK economy.”

Last year, Aldi signed a 20-year agreement with family-owned fruit farm A C Goatham & Son in Kent to create a 200-acre Aldi Orchard to supply the chain’s entire core range of British apples. And last month, the discounter revealed that it had signed a new contract worth around £320m over the next five years with Yorkshire-based beef supplier Warrendale Wagyu.

Hurley concluded: “Hitting this milestone early is a proud moment for us and for the thousands of British suppliers we work with. Their hard work and dedication are what helps us deliver great quality and value to our customers every day.

“As we look ahead, our British suppliers can know that we’ll continue to stand alongside them – just as we have for the past 35 years.”

Aldi is celebrating its 35th year in the UK this weekend, having made its debut on 5th April 1990, opening a store in the Stechford area of Birmingham.

NamNews Implications:

• Given that the future of UK retail is much about Retail Media...
• ...in turn based mainly upon optimising the use of brands' First Party Data...
• ...brand suppliers should prepare now for Aldi’s inevitable move towards a 50/50 brand-surrogate label balance.
• As the discounter remodels its business to optimise the potential of Retail Media...

hashtag

Supermarkets Ramping Up Promotions; Aldi Achieves Record Market Share

According to the latest data from Kantar, take-home sales at UK grocers increased by 1.8% over the four weeks to 23 March compared with a year ago, marking the slowest rate since June 2024. Grocery price inflation rose slightly to 3.5% over the same period, with shoppers turning to promotions to save money.

“With prices continuing to rise, supermarkets are mindful of the need to invest to attract shoppers through their doors,” said Fraser McKevitt, head of retail and consumer insight at Kantar. “Promotional sales ramped up this month to 28.2% of total grocery spending, the highest level we’ve seen in March for four years.”

The data shows that retailer price cuts were responsible for £2.6bn of promotional spending, 8.8% more than the same time last year and significantly higher than the £686m spent on multibuy deals and ‘extra free’ offers. McKevitt added: “Despite the recent surge, we’re still some way off the promotional records hit in the wake of the financial crisis. Average spending on deals in 2012 was 39.8%, meaning there could still be more headroom to go. However, the market has changed a lot in that time, with the discounters holding a far higher share today than they did 13 years ago.”

Kantar noted that retailers battling to deliver value will be welcome news for households who remain worried about their financial situation. A recent survey by the research firm found that while the number of people reported as financially struggling has fallen from its peak of 27% in October 2022, this still accounts for almost a quarter (22%) of the country. “The rising cost of groceries ranks third on the list of concerns keeping consumers awake at night, just behind energy bills and the country’s overall economic outlook,” said McKevitt.

Despite financial concerns, consumers are still finding ways to treat themselves. Last month, sales of chocolate eggs and seasonal confectionery reached £134m, and over a third of households bought hot cross buns, even though Easter isn’t until late April.

As Aldi prepares to celebrate the 35th anniversary of its first store opening in the UK on 5 April, its share of the grocery market hit 11.0% for the first time over the 12 weeks to 23 March. This was up 0.3 percentage points from last year after its sales grew by 5.6% – the fastest rate for the discounter since last January.

Lidl’s sales rose by 9.1%, taking its market share to 7.8%, 0.4 percentage points higher than a year ago. It attracted 385,000 more shoppers last month, more than any other grocer, and saw a double-digit rise in footfall.

Ocado was again the fastest-growing grocer, a position it has held for the last 11 months, after its sales increased by 11.2%. For the first time, the online retailer took a 2.0% portion of the market. Spending on groceries at M&S increased by 13.1%, on top of M&S goods sold through Ocado.

Tesco saw spending through its tills rise by 5.4%, nearly half a billion pounds more than the same period a year ago. The UK’s largest grocer made the biggest share gain, with its portion climbing from 27.3% to 27.9%. Sainsbury’s reached 35 consecutive periods of year-on-year growth, with sales up by 4.1% as it grew ahead of the market. Its share nudged up to 15.2%.

Despite its turnaround efforts, sales at Morrisons were up only 0.6%, and its market share slipped to 8.5%. Meanwhile, Asda’s price rollback campaign appears not to have yet had a significant impact on its performance, with its market share declining to 12.5% after a 5.6% fall in sales.

NamNews Implications:

• The key standout is the Tesco-Sainsbury’s-Aldi-Lidl growth in market share, largely at the expense of Asda and Morrisons.
• Moreover, increases in sales performance across the board is being ‘bought’ via price promotion.
• With possibly more of the same as Autumn Budget tax increases now begin to bite in April.
• Suppliers need to anticipate the probability that retailers will now want (need?) them to share some more of the promo-cost of encouraging uncertain shoppers to spend.
• Any reluctance by brand owners runs the risk of more consumers turning to own label alternatives…