Shore Capital has taken aim at Aldi GB, accusing the discounter of “myopic hypocrisy” over its recent complaints about loyalty schemes, in a note on the UK grocery sector.
Analysts Clive Black and Darren Shirley used the latest industry data to push back hard at Aldi’s suggestion that supermarket loyalty pricing amounts to price gouging.
They noted the Competition and Markets Authority (CMA) has already examined the practice and given it a broad clean bill of health.
A sound summer for the sector
The broker described August trading as solid, with no major shocks, and said it saw no reason to change its earnings expectations for the listed players.
Industry figures from NIQ showed UK grocery value growth of 3.1% in the four weeks to 8 August, with volumes up 1%.
A long, hot and dry summer supported demand for ice cream, soft drinks and suncare, which together accounted for 45% of all sector value growth.
Ocado Retail carried the strongest momentum, up 17% over 12 weeks, followed by Marks & Spencer at around 13% and Lidl at 8.2%.
Among the full-line grocers, Sainsbury’s grew 3.6%, with Tesco and Waitrose both up 3.2% and Morrisons at 3.1%.
Aldi in the firing line
Against that backdrop, Shore Capital argued Aldi was in a weak position to cry foul.
The analysts calculated that Aldi’s 0.8% sales growth, adjusted for food inflation, implied a like-for-like volume decline of more than 5%, weaker even than the struggling Asda.
They pointed out that Aldi, which carries no loyalty scheme and is roughly 95% own-label, is in its third year of falling same-store volumes despite opening new space.
The note also flagged discomfort with what it called a “too cosy” relationship between Aldi and consumer group Which?.
Winners worth backing
The broker reserved warmer words for the quoted supermarkets. It said J Sainsbury PLC (LSE:SBRY), which is selling Argos, and Tesco PLC (LSE:TSCO) had been deservedly re-rated as cash-generative businesses with strong balance sheets, making them good defensive holdings.
Marks and Spencer Group PLC (LSE:MKS) remained a stock with room for further rating gains, driven by a food arm outpacing its clothing operations.
Looking ahead, Shore Capital said it would watch for the usual autumn price-raising noise, food inflation creeping higher, and the impact of the first Healey Budget on 26 October.
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