Grocers see worst-ever month as food prices soar

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Higher food prices have landed UK grocers with their worst-ever month for sales, prompting a warning that investing in supermarkets "represents much higher risk than at any point in recent history".

Overall UK sales rose 0.2% by volume in June, excluding fuel, narrowly beating market expectations, and a boost attributed largely to the early start to the summer discounts season, official statisticians said.

However, food stores saw volumes slump by 4.2%, the worst performance on record, crystallising concerns over a sector which has enjoyed positive sales only once in 17 months.

National Statistics attributed the decline, which affected both supermarket chains and small grocers, to "high prices", which have rose by 5.8% over the year, above consumer inflation of 4.2%.

Prepare for downgrades

The data, which come amid global concerns over food prices, were termed "astonishing" by analysts at Evolution Securities, noting that they included store expansion.

"Like-for-like volume falls will be much worse," the broker noted, saying the decline reflected a switch by customers to buying cheaper food rather and cutting waste after several decades of "trading up".

Such "serious" drops in sales "will be damaging for retailers", Evolution added, bracing food retail investors "downgrades across" a sector which currently attracts a 10% premium to average stockmarket ratings in London.

"The sector currently represents much higher risk than at any point in recent history. We do not believe the market is currently factoring in this risk sufficiently."–3386.html

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