Blog: Dean BestPromotional activity intensifies at Waitrose

Dean Best | 15 September 2011

A day after Marks and Spencer looked to emphasise its "speciality" credentials, with the unveiling of new, upmarket departments in its food halls, fierce rival Waitrose made the rather more prosaic announcement of its half-year results.

Waitrose reported a drop in half-year profits despite higher turnover and pointed to a series of capital investments for the lower profits. It cited spending on new supermarkets and convenience stores, on the refurbishment of exsiting outlets and on its distribution network.

Nevertheless, one interesting revelation was that Waitrose had upped its level of promotions in the first half of 2011, compared to a year ago. In the first six months of the year, 26.9% of products were sold on promotion, up 3.3% on the first half of 2010. Waitrose also told just-food that its discounts had increased through "deeper" promotions.

Analysts at Arden Partners said the impact of the discounting on margins was "relatively benign", with gross margin down by "little more than ten basis points".

Waitrose, meanwhile, said its Brand Price Match promotion - through which it sells "100 everyday branded products" at the same price as Tesco - had had "no impact on margins".

For all that, the retailer's promotional activity appears to be boosting sales, which it said were "industry-leading" and meant it had "outperformed the market for over two years". Analysts were impressed with Waitrose's like-for-like sales, which increased 4%.

Waitrose was supposed to be one of the victims of the downturn and we all know that the retailer has managed to withstand the pressure and, in many ways, thrive as some of its rivals withered. 

The retailer seems to be adopting a different strategy to its upmarket rival M&S, which has brought in deli counters, rustic bakery departments and niche brands from all over the world. It will be interesting to see which pays off in the next 12 months or so.


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