Talking shop: Can profits follow Waitrose H1 sales north?
Waitrose has made a series of moves to try to encourage the UK's cautious and promiscuous shoppers to its stores
UK retailer Waitrose has won praise from analysts today after a solid rise in first-half sales led by its convenience and online businesses but we wait to hear the impact of recent promotional activity on profits. Chris Mercer reports.
UK retailer Waitrose has charmed analysts with a solid rise in first-half sales led by its convenience and online businesses.
For the 26 weeks to 28 July, Waitrose saw sales rise by 7%. Although this represents a slowdown from the same period of last year, the high-end retailer earned praise for outperforming market expectations in what remains a challenging UK retail environment.
Shore Capital analysts Clive Black and Darren Shirley said that an "outstanding" 26th week, during which sales jumped by 13.6%, contributed to an "excellent" half-year for Waitrose.
The contrast with some rivals was noted. "Waitrose, therefore, is outperforming its superstore peers and Marks and Spencer, with only the deep discounters, Aldi and Lidl, delivering more robust overall sales revenues in this period of time," said the analysts.
Waitrose declined to comment on the figures until its full interim results statement. Yet, management will surely welcome the 86% spike in convenience channel sales versus the first half of last year.
There are no like-for-like sales figures, and it's likely that a hefty chunk of this increase has come from new stores. Still, convenience is seen as a key growth area for the business and the early signs, at least, are promising. Earlier this year, Waitrose said that it planned to open a combined 20 "little" Waitrose stores and supermarket stores in 2012.
Alongside the C-store format, many commentators have also been looking for Waitrose to make a bigger splash online. There were signs of this today, too, as the John Lewis Partnership-owned retailer saw online sales rise by 28% for the half-year.
Shore Capital's Black and Shirley think there is more to come, potentially at the expense of Ocado. "Even taking into account the lower base, we believe that it is noteworthy that such on-line growth momentum by Waitrose is materially ahead of that recorded by Ocado," the analysts said.
"Ocado depends upon Waitrose for product (indeed we see Ocado largely as a Waitrose distributor) and as more households understand that they can go to the organ grinder rather than the monkey then we see scope for sustained switching," they added.
It will, however, be interesting to see how Waitrose's recent promotional activity has affected its profitability.
In recent weeks, Waitrose has made a series of moves to try to encourage the UK's cautious and promiscuous shoppers to its stores.
Last week, it sent a discount card offering "new and potential shoppers" 10% off every time they visit a Waitrose outlet over the next four weeks.
In May, Waitrose said it would extend its Brand Price Match scheme and match Tesco's prices on 7,000 brands, up from 1,000.
In March, Waitrose admitted its efforts to attract shoppers in a very competitive market had hit its annual profits. Its operating profit fell 5.2% in the year to 28 January.
Nevertheless, MD Mark Price said Waitrose would become "more price competitive" and its recent initiatives proves the retailer's has put his words into action.
Waitrose's first-half sales are solid but for a more detailed picture of its performance, we need to see how its profits developed in the last six months.
Ocado's Christmas sales rise has brought some cheer to investors, but analysts say the retailer's path to sustainable profit remains riddled with risks....
Fresh market share figures for the UK grocery sector show strong gains for discounters Aldi and Lidl as consumer budgets are squeezed by inflation....
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