Tax rises could hit your weekly shop as supermarkets declare ‘biggest ever Christmas’
Supermarkets festive cheer hit by mounting concerns over UK economy and added taxes
Two of the UK’s largest retailers, Tesco and Marks & Spencer, emerged triumphant from the battle to furnish the country’s festive feasting.
Tesco, the UK’s largest supermarket, declared it enjoyed its “biggest ever Christmas”, with sales rising by 4 per cent in the six weeks to 4 January.
Marks & Spencer also enjoyed a Christmas boost with like-for-like food sales up 8.9 per cent in the 13 weeks to 28 December. Its sales surpassed £4bn and also recorded its “biggest ever day” for sales on 23 December.
M&S’s upmarket food, traditionally popular at Christmas, saw even stronger sales over December making it the top-performing store-based grocery retailer over the period.
It reported a better-than-expected 8.9 per cent rise in like-for-like food sales and a 1.9 per cent rise in clothing, home and beauty in the Christmas trading period, making it one of the best performers on the high street.
Stuart Machin, M&S chief executive, said: “This was another good Christmas for M&S. Sales records were broken across the business, with food recording its biggest day and clothing, home & beauty online its biggest week, but we’re not complacent – as a growth business it’s our job to break records.
“In food, our focus on quality, innovation and trusted value translated into strong sales and market share growth, with M&S the top performing store-based grocery retailer over the period.”
Tesco enjoyed its highest grocery market share (28.5%) since 2016 after sales rose as it said more customers switched to the supermarket over the crucial Christmas season.
The UK’s biggest supermarket chain reported UK and Ireland like-for-like sales, excluding fuel and VAT, up 3.7 per cent over the six weeks to January 4 and record trading in the week before Christmas.
Tesco said customers were shopping both for value products over Christmas, but also trading up, with a 15.5 per cent rise in sales of its premium Finest ranges.
Ken Murphy, chief executive, said: “We invested to bring the best value, quality and service to everyone, no matter how or where they shopped with us.
“As a result, we delivered our biggest ever Christmas, with continued market share growth and switching gains.”
He said that Tesco had gained customers from “all corners of the market” in recent months.
Despite the good performances, shares of both Tesco, and Marks fell, with Tesco dropping up to 4 per cent and M&S as much as 8.4 per cent after both warned of tougher trading conditions they face due to higher payroll taxes
Tesco said it faces a hit of around £250m a year from the increase in national insurance contributions when the changes roll out in April, with more increases from the minimum wage rise.
Mr Murphy said: “What I won’t say is there will be no inflation, but we’ll do out very best to minimise the impact.”
Stuart Machin said admitted M&S had been forced to “rework” its plan for the coming years as it had not accounted for the decision in the Budget to raise national insurance contributions (NICs) for companies.
He warned any cost inflation would be small but that mitigating it is “not easy”.
“Our suppliers are also feeling the pinch, and that comes through straight to retail.” Asked if job cuts would be necessary, he said: “This is going to be a challenge for us. I do not see in M&S big job losses. We’re a growing business. We’ve got lots to do.”
Mark Crouch, market analyst at investment platform eToro, said: “The Christmas period is crucial for retailers, often determining the success of an entire year, and fortunately for M&S shareholders, the company has delivered in spades and shows no signs of slowing down after an exceptional run over the past two years.”
