Only one of the U.K's biggest retailers gained market share in the ultra-competitive Christmas sales period with discount stores getting a big festive bonus, according to the latest industry figures.
The figures, from Kantar Worldpanel for the 12 weeks ending January 3, showed no Christmas uplift for the British grocery market as a whole as consumer spending 0.2 percent on last year, thanks to falling prices.
Discount retailers such as Lidl and Aldi, as well as premium brand Waitrose, the Co-operative and Sainsbury's "successfully grew ahead of the market and were the share winners over Christmas," the consumer data researcher said.
Sainsbury's – one of the "big four" U.K. supermarkets along with Tesco, Asda and William Morrison – was the best performing of the traditional supermarkets, according to Kantar Worldpanel's figures.
"Its premium Taste the Difference brand posted its biggest ever Christmas sales and promotional efforts were concentrated on simple price cuts rather than complicated multi-buy deals. This helped attract an additional 114,000 shoppers, with sales increasing by 0.8 percent on last year."
In the same period, Tesco sales fell by 2.7 percent from the same period a year before. Asda's sales fell 3.5 percent and Morrisons' declined 2.6 percent, according to Kantar.
However, it was the upstart discounters such as Aldi and Lidl that saw the biggest leap in sales over the 12 week period. Lidl was the fastest growing retailer overall, with sales up by 18.5 percent.
An expanded product range, especially in its Deluxe premium line, has encouraged consumers to increase the size of their shop, with average basket sizes up by 7 percent to £17.20. Aldi followed with an increase in sales of 13.3 percent.
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Despite the figures, Tesco shares were up 5.6 percent on the London FTSE index. Morrisons shares were up 9.8 percent. U.S. retail giant Wal-mart owns Asda. shares of Sainsbury's were up 3 percent.
Falling prices
Consumers' demands for better pricing has not been lost on the more "traditional" market leaders.
The U.K.'s "big four" have been engaged in a battle over consumers with the strategy largely one of cutting prices across the board as well as closing unprofitable stores.
With the price war continuing apace, shoppers were the ultimate winners, Kantar Worldpanel's head of retail and consumer insight said on Tuesday.
"Shoppers reaped the benefit of falling prices this Christmas, with groceries 1.8 percent cheaper than last year," Fraser McKevitt said. "The amount spent on a typical Christmas dinner fell even faster – down by 2.2 percent – mainly due to cheaper poultry and traditional vegetable trimmings. Alcohol sales increased thanks to a surge in popularity for sparkling wines including Champagne and Prosecco, which increased in value by 11 percent," he added.
The good news was not confined to Sainsbury's alone, however. On Tuesday, Morrisons beat expectations for Christmas trading, reporting a 0.2 percent increase in same store sales, excluding fuel, in the nine weeks to January 3. That compares to analysts' average forecast of a decrease of 2 percent in the same period, according to analysts polled by Reuters.
Morrisons, as the fourth largest supermarket in the U.K., has been feeling the pinch alongside its rivals and recently disposed of 140 of its smaller, local stores. It has also cut around 800 head office roles since the start of 2015/16 financial year.
David Potts, Morrisons' chief executive, said the supermarket was pleased with its performance over the Christmas period.
"While there is of course much more to do, we are making important progress in improving all aspects of the shopping trip, and our customers tell us they are pleased with the changes. In addition, we have made further progress in debt reduction, and our financial position is strong and getting stronger," he said, according to the company's earnings release.
The bad news?
Morrisons CEO might be optimistic but retail analysts were ready to pour cold water on the numbers. John Ibbotson, director at retail consultants, Retail Vision, said that "Morrisons entered the Christmas period in near critical condition but despite these surprise numbers it remains in intensive care."
"Morrisons, like the rest of the Big Four, is facing food deflation, changing shopper habits, not to mention the startling growth of the low cost discounters, convenience stores and the internet. It lacks the size and profitability of Tesco, has lost its price perception to ASDA and can't compete with the quality and service standards of Sainsbury's," he said in a note on Tuesday.
Another stalwart of the British high street, department store Debenhams, also posted higher-than-expected sales in the 19 weeks to January 9, driven in no small part by a strong performance in the run-up to Christmas when same store sales were up 1.8 percent.
On the continent, things are even rosier. Germany's Metro, Europe's fourth-largest retailer, reported what it called "very good Christmas business in Germany" with like-for-like sales having increased by 2.1 percent.
A further clue on the health of the U.K.'s largest retailers comes on Wednesday and Thursday when Sainsbury's and Tesco report their respective sales numbers.
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow CNBC International on Twitter and Facebook.