Big four expected to profit as discounters stumble over Christmas
Analysts claim Aldi and Lidl both struggled to entice consumers over the festive period.
Despite big budget advertising campaigns (courtesy of Aldi’s Kevin the Carrot and Lidl Surprises), analysts are claiming that Aldi and Lidl saw disappointing sales over Christmas.
Clive Black, head of research at the stockbroker Shore Capital, predicts like-for-like sales at Lidl’s existing shops fell by as much as 4% as Aldi’s remained “flat” over the festive period. Although the discounters saw sales fall, their market share would have risen in December, according to Bernstein analyst Bruno Monteyne, because of new store openings.
Read more: Aldi insists customers are ‘not returning to the big four’
The German discounters struggled primarily due to being understaffed and unable to cope with demand, according to Black. He says poor stock levels meant Aldi and Lidl’s shops looked as “if they’ve been robbed by a load of school kids”.
However, Aldi today (9 January) hit back and said sales were in fact up by 15% in December. It is worth noting that Aldi wouldn’t publish like-for-like figures, which exclude sales from new stores, of which it opened 70 in 2016 as part of an ongoing aggressive expansion strategy in the UK.
Interestingly, Black’s claims of a Lidl struggle go against Kantar Millward Brown. In December, it claimed Lidl’s turkey-based Christmas ad was the most likely to result in a consumer purchase and it backed the discounter to shine.
How other retailers may have performed over Christmas
The ongoing resurgence of Tesco and Morrisons is thought to have also dented sales momentum for Aldi and Lidl. Later this week, the city expects Tesco to report a modest 1% rise in like-for-like sales over Christmas, with Morrisons’ sales up as much as 2.5%. Sainsbury’s is expected to announce a 0.8% fall, though its Argos business is backed to deliver sales growth of up to 2%.
Elsewhere, Marks & Spencer is predicted to post a small rise in clothing sales for the festive period, marking its first increase in more than six years. This would represent a welcome boost for the struggling retailer after rival Next’s poor trading update last week wiped £2bn off its share price in less than 24 hours.
Meanwhile, independent retail analyst Nick Bubb predicts a 3.7% increase in like-for-like sales at John Lewis for the six weeks to 31 December. However, Bubb says this will have come at a cost.
He concludes: “The skewing of sales growth to online will have been expensive [for John Lewis] in terms of fulfilment and distribution costs.
“The worry is also that increased discounting and price matching will have cost John Lewis quite a bit of gross margin, which will have eaten into its profits.”
