GO
Loading...

Bleak Christmas for top UK supermarkets

U.K. retailers reported weak sales for the festive trading period Thursday as heavy discounting and subdued consumer spending took their toll, the latest in a line of disappointing trading results for the sector.

Clothes and food chain Marks and Spencer reported its 10th consecutive quarter of falls in clothing sales while the food business, which represents over half of group sales, performed better than analysts had expected. Breaking down the total, M&S reported that like-for-like food sales rose 1.6 percent while the like-for-like general merchandise figure dropped 2.1 percent.

The retailer said one in four UK families enjoyed an M&S turkey on Christmas Day, but competition was fierce in a challenging environment. Shares of M&S initially fell but rebounded to trade up 3 percent in morning trade.

The picture looked even worse for some of Marks & Spencer's competitors: Tesco, the world's third-largest supermarket group by sales, was trading 3 percent lower. British grocer WM Morrison tumbled over 5 percent in early deals and was the sharpest faller on the FTSE100 index.

Tesco said like-for-like sales in Europe fell 1.6 percent in the six weeks to January 4. In the U.K. -- the supermarket's home market -- the picture was much worse, with like-for-like sales, excluding fuel, falling 2.4 percent in the same period. Like-for-like sales excluding fuel dropped 5.6 percent in the six weeks to January 5 at WM Morrison.

Mary Turner | Getty Images News | Getty Images

Sales have already come under increasing pressure as consumers become more discerning and price-conscious when making purchases.

The larger supermarkets such as Wal-Mart's Asda, Tesco, J Sainsbury and Morrison's in particular are facing increased competition from cut-price retailers like Lidl and Aldi.

On Wednesday, rival supermarket chain J Sainsbury reported slightly higher like-for-like sales for the third quarter.

Tesco, meanwhile reported a sharp drop in third-quarter like-for-like sales in December just ahead of the busy Christmas trading period, as the retailer struggled to woo cash-strapped consumers. Its latest results could put pressure on chief executive Philip Clarke to end the run of disappointing results.

He said in the group's trading statement that "further weakness in the grocery market as a whole continued to impact our performance in the U.K" but that the group was making "strategic changes" to improve "the long-term sustainability of our business."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.

Contact Earnings

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More