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EDITORIAL Asda results show how food inflation is starting to bite

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Asda y-o-y results show just how Brexit pressure is starting to bite on food sales
Asda y-o-y results show just how Brexit pressure is starting to bite on food sales
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ONS figures and Asda results show how tough food retail is right now

Office for National Statistics (ONS) figures have made for sober reading in recent months, however figures for the quarter ended in July show some unexpected good news for, of all things, department stores.

 

The figures show that online is sustaining the overall growth in the retail sector – an onward rise since 2014, even if it may not feel like it – but that department stores showing the first growth of 2019, up by 1.6%. Probably not a renaissance, but a sign that maybe the worst is over. Perhaps.

 

The worst may yet still be to come for the food sector, however. The same ONS numbers which make great reading for etailers and even department stores, show that food is the only sector to report a contraction over the period.

 

This is backed up by Asda’s results also out today, which delivered just 0.5% growth over the quarter, but more troublingly are down by 0.3% year on year. The supermarket’s parent, Walmart, is blaming the fall on ‘macro economic issues’ – or Brexit – and is planning to weather the storm to see brighter times ahead.

 

However, with food inflation hitting everyone in the UK who eats food, players such as Lidl and Aldi must be taking a slice of the ‘big three’ sales. I have switched – I bet despite my propensity it living high on the hog, I am not the only one seeing the main supermarkets as being too pricey. And I like Aldi.

 

Asda is to be saluted for trying to shake things up, though. Looking to vegan and vegetarian ranges and to tying up with Just Eat to deliver groceries are all interesting new ways to operate in the grocery sector, but still there is the price issue.

 

Asda – like many – is holding out for at least some clarity on Brexit to deliver some sort of forward motion, but the trouble with people tightening their belts is that they often take a while to loosen them again and, where habits have changed, often they don’t change back.

 

Like all retailers, Asda is going to be faced with having to cut prices to keep customers and, should the worst predictions of Brexit come true – inflation, stagnation and runs on the pound – then results are likely to take a massive hit last quarter of 2019 and into 2020.

 

Adsa Walmart has deep pockets so will weather the storm, but what does it mean for others in the retail sector? Can they weather the storm ahead as prices have to be cut while costs go up?

 

This is really the big question that Brexit throws up and it is that uncertainty that is hitting everyone so hard.

 

However, this quarter’s ONS numbers are positive as they show that it hasn’t ground to a halt and, who knows, maybe the worst is over for some retailers.

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