Tesco stabilising but rising popularity of Lidl and Aldi's lux offering could yet hamper recovery

Tesco is “stabilising” after two years of historic declines, but the burgeoning luxury offering of discounters Lidl and Aldi are proving popular among shoppers suggesting that the grocer’s recovery – and that of fellow Big Four retailers – could yet be hampered.

According to the latest share figures from Kantar Worldpanel (covering the 12 weeks ending 22 May 2016) sales at Tesco are down just one per cent, the smallest drop compared to its main competitors.

Sainsbury’s suffered a 1.2 per cent fall in sales partly due to its decision to shift its promotional emphasis from multi-pack deals to straightforward price (the consequences of which will be short-term according to Kantar) while Morrisons has seen a 2.1 per cent fall mainly due to a raft of store closures.

It’s Asda that’s fairing the worst in the current climate, with a drastic 5.1 per cent downturn in sales.

However, the Big Four can take comfort in knowing that customers aren’t yet turning away in their droves. Although all have lost market share, combined their shopper numbers have dropped only 0.2 per cent in the past 12 weeks.

“What’s clear is that consumers aren’t flocking away from their stores […] In fact, 94 per cent of Aldi and Lidl shoppers still visit at least one of the four major retailers every four weeks,” said Edward Garner, director at Kantar Worldpanel.

But Lidl and Aldi have basked in a 14.2 per cent and 11.4 per cent respective boom in sales. What’s interesting about the growth of late is the popularity of their luxury offerings, which show no sign of abating.

Aldi’s premium own label Specially Selected has grown by 15 per cent while Lidl’s Deluxe range has grown by an impressive 65 per cent. With the discounters having heavily eroded the Big Four's low-price credentials, time will tell how much more they can chip away at their 'quality' proposition which all four have been trying to highlight among consumers of late.

Elsewhere, Waitrose has achieved a record share of the grocery market of 5.3 per cent, growing sales by 2.1 per cent.

The Co-operative has also continued its recent strong run, posting sales growth of 3.3 per cent for the second period in a row to achieve a market share of 6.2 per cent. A major revamp of the brand and its store offering, which was revealed this week, should keep the momentum.

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