M&S Celebrates Strong Christmas as Brits Feast on Top Tier Food

Marks & Spencer Group Plc’s high-end grocery business enjoyed its best ever market share in the run-up to Christmas as shoppers indulged in festive treats despite the worst cost-of-living crisis in a generation.

(Bloomberg) — Marks & Spencer Group Plc’s high-end grocery business enjoyed its best ever market share in the run-up to Christmas as shoppers indulged in festive treats despite the worst cost-of-living crisis in a generation.

The seasonal boost was not enough to lift the company’s profit guidance, however, due to “macro-economic headwinds ahead and underlying cost pressures.”

Shares were down 0.8% at 8:15 a.m.

Like-for-like food sales rose 6.3% with strong demand for turkeys and other seasonal classics. The company said its value brand boosted volumes but added that sales of “top tier” products rose more than 20%.

M&S’s market share for clothing and homeware reached its highest level for seven years, an “outstanding performance” according to Chief Executive Officer Stuart Machin.

Tesco Plc also kept its profit forecast unchanged in a sign of how challenging the market is expected to be for retailers this year as months of high inflation eke away at customer budgets. Its shares were down 1.1% in early trading.

Britain’s largest supermarket had already reduced its profit guidance in October, saying that retail adjusted operating profit will be between £2.4 billion ($2.9 billion) and £2.5 billion this year, lowering the upper range from £2.6 billion.

Tesco said its own premium range of food, Finest, saw an 8.2% rise in sales. There had been fears that UK grocers could suffer as sales of typical Christmas treats such as panettone rose at German discounters Aldi and Lidl.

Wages and Prices

Like its rivals, Tesco is having to invest in boosting employee pay and reducing prices while input costs are rising. The grocer is freezing prices on more than 1,000 products until April 10, extending a previous price lock which ran from October until the start of this year. Tesco already matches prices with Aldi across hundreds of basic items.

J Sainsbury Plc, the country’s second-largest grocer, also held its forecast steady this week but guided to the upper side of its range. At a time when customers are hunting for deals “you would expect me to be cautious about the year ahead,” said Chief Executive Officer Simon Roberts on Wednesday. 

Read More: Rising Costs And Stiff Competition Cloud Outlook For Sainsbury

Rising food inflation is taking its toll on shoppers. Consumers spent a record £12 billion on groceries in December due to higher prices even as sales by volume fell 1%, Kantar data showed last week.

Even as retailers including Next Plc report bumper Christmas sales and raise their profit outlooks, the focus is shifting to the mood for consumers this year. Shoppers are likely to become more cash-strapped as bills arrive for their festive spending and mortgage rates rise.

On the Upside

Nonetheless, some analysts believe retailers such as M&S can weather the storm.

“M&S is doing the right things where it has control, and with better externalities brighter times should be ahead,” Shore Capital analyst Clive Black wrote in a note. “Forecast risk is on the upside.”

Shore Capital is M&S’s house broker. The stock lost almost half its value last year. 

M&S’s e-commerce revenue also helped boost sales. Its volumes through the online joint venture with Ocado Group Plc represented about 30% of the average basket on Ocado.com over the Christmas period.

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