Latest data released by research house Nielsen on Tuesday underlined the chronic problems facing the countrys established grocery houses like Tesco (LSE: TSCO) and Sainsburys (LSE: SBRY).
The bodys numbers showed Tescos market share slip by 20 basis points during the four weeks to October 10, to 27.5%, Sharecast reported. Meanwhile rivals Morrisons and Asda both saw their shares fall by 100 points in the period, to 10.7% and 15.5% respectively.
Sainsburys put in a much-better performance during the period and saw its slice of the market remain stagnant at 15.9%. However, Nielsens numbers will concern all of the major retailers as, after a few months of sales moderation, activity at the countrys major discounters is picking up the pace once again.
Indeed, Lidl saw sales rocket 23.3% in the three months to October 10, the quickest rate of growth for almost a year and driving its market share to 4.4% versus 3.6% at the same point in 2014. And Aldi saw its share advance to 6.6% from 5.2% over the period, driven by a stunning 27.6% sales upswing, the fastest rate of growth for 18 months.
Asda on the rocks
The researchers release follows Asdas tricky trading update issued on Monday. This showed till activity at its established stores i.e. those open for a year or more slump 4.7% during April-June. This was the worst quarterly performance in the firms 50-year history.
As Nielsens data today shows, these customers are not breaking down the doors at Tesco and Sainsburys, and are instead flocking to the budget chains in their droves. On top of this, Asda like its top four competitors are seeing revenues slip as the chronic price wars across the middle tier intensify.
Landscape becoming tougher
And Asda is not the only operator failing in this regard Tesco saw like-for-like revenues slump 1.1% in the six months to August, while Sainsburys also saw underlying sales drop 1.1% in July-September.
All of the mid-tier operators are failing to protect their customer bases despite introducing price cut after price cut, and they cannot compete with the premium outlets on quality, either. Indeed, Nielsen advised that Marks & Spencer enjoyed a 3% sales boost in the four weeks to October 10.
And the situation is likely to get even more perilous for Tesco et al, in my opinion as both low- and high-end chains plough billions into expanding their store networks, while Aldis plans to begin selling wine online is especially worrying internet shopping is the sole genuine growth area for the established retailers.
As a consequence, Tesco is expected to chalk up a fourth consecutive earnings drop in the year to February 2016, this time by a head-thumping 35%. And Sainsburys is anticipated to record a 19% dip in the period to March 2016. While both chains continue to flail in their battle against the discounters, I believe investors should continue to steer well clear.
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