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Mintel’s Month in Retail highlights the stories that have made headlines in the European retail markets over the past four weeks, with exclusive analysis from Mintel’s expert retail team on potential implications.

UK: Morrisons achieves first comparable sales and profit growth since 2012

During the year to 29 January 2017, Morrisons’ like-for-like sales increased 1.7% following positive growth in all four quarters. Turnover grew by 1.2% to £16.3bn and underlying profit before tax (UPBT) surged 11.6% to £337m. Morrisons noted that this was the first year of positive like-for-like sales and UPBT growth since 2011/12.

“These are positive results whichever way you cut it and they speak to the good work CEO David Potts and his team have put in place since taking the reins. Mintel research indicates that better availability, improved loyalty schemes, improved quality and range of fresh foods, shorter waiting times at checkouts and better quality of own-brand are areas that shoppers would most like to see improved. In the past year, Morrisons has improved availability by up to 30%, invested in own-brand, invested in more locally sourced products, shortened waiting times at checkout and refitted 100 stores. However, as David Potts notes, this is ‘just one year’ and the retailer will need to build from these more solid foundations to ensure the continued turnaround of the business.”.”

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UK: Next sales level for the year

While total Next Brand sales remained level with last year at £4bn, Next Directory sales grew 4.2% to £1.7bn driven by continued growth in online sales. Next Retail saw revenues decline 2.9% to £2.3bn with full price sales falling 4.6%. Operating profit dropped 2.8% to £828 million with an increase in markdown stock eroding margin.

“Next has been cautious in its guidance throughout the year and, as a result, has produced pretty good results. It has improved its share of specialist sales by offering more stock and by tolerating higher markdowns. It has put emphasis on more fashionable lines but, in doing so, has neglected the easy-to-wear basics. One of the reasons that Next has performed so well in recent years is that it has eaten away at M&S’s younger customer base. Looking ahead, Next is very cautious about 2017, guiding analysts to expect a fall in full price sales, citing rising inflation, a weak economy and a shift in spending from clothing to leisure. Next has the challenge of generating growth on top of a strong performance over several years, but the data suggests that it is losing share of spending on clothing overall.”

France: Carrefour unveils digital innovations

French supermarket operator Carrefour is readying the launch of multiple innovations focused on time saving services, including a new meal-kit box and an improved Pikit – the device that enables Carrefour Drive shoppers to scan barcodes at home and add them to an online cart. In addition, Carrefour has revealed plans to roll out its Livraison Express service, designed to compete with Amazon Prime, expanding the range to include over 3,000 products.

“Online grocery is less developed in France than in other Western European countries. Mintel’s Supermarkets France 2016 report found that only 20% of grocery shoppers do some online grocery shopping, compared to nearly half of UK consumers. However, the market is developing quickly, with extra convenience being the main driver: a third of online grocery shoppers in France say they shop online to cut out travel time to stores. Livraison Express stands out both as a way to combat Amazon’s fledgling French grocery offer through its Prime Now service and for its ability to serve more immediate small basket needs, something that to date online grocery has struggled to serve.”

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Italy: Esselunga revenues grow 3.1%

Italian supermarket retailer Esselunga has reported full-year revenues of €7.5bn in 2016, up 3.1% compared to 2015. The results were achieved as the group implemented an average price decrease of 1.1%, helping the retailer to attract new customers, up 4.4% year-on-year. During the year, operating profit amounted to €405m, down 6% from €431m in 2015.

“Esselunga has maintained its steady growth by continuing to focus on offering low prices on its core ranges and absorbing price increases from suppliers. Furthermore, the retailer is continuing to gradually expand its store network across the country, thus reaching more consumers. Whilst online retailing remains small in Italy, there are signs that it is becoming more popular, with a quarter of grocery shoppers saying they sometimes do their top-up shopping online rather than in-store. Esselunga was the first grocery retailer to launch a significant online delivery service in Italy and it is continuing to strengthen its offer, recently launching a click-and-collect trial.”

Spain: Inditex like-for-like sales rise 10% in 2016

In 2016, the Spanish clothing group Inditex delivered a 10% rise in like-for-like sales. Net sales rose 12% to €23.31bn, following a strong comparative year in 2015. Inditex investments topped €1.4bn in 2016, which went on logistics, technology, store and online expansion, and its sustainability effort.

“Inditex has succeeded in continuing to grow sales at a time when many other retailers are suffering. Zara remains the driving force behind the company, with net sales increasing 13% during 2016. What’s more, Mintel research shows that Zara stands out as the retailer where UK consumers are most likely to shop in order to buy an item that is part of a new fashion trend. Zara benefits from having an established local supply chain, which allows it to react quickly to changing styles and what’s selling. Inditex’s other brands, including Pull & Bear and Massimo Dutti, have also performed well. The company is expanding the footprint of its other brands in the UK and is looking to tap into the growing menswear market with its Stradivarius brand launching men’s clothing in 2017.”

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UK: Lidl opens first metropolitan format store

Lidl has opened the first of a new ‘metropolitan’ store format in London, located in Bermondsey. Designed specifically for inner city areas, the store has been elevated onto the first floor so that additional car spaces are available on the ground floor. The format falls within Lidl’s ‘Store of the Future’ format with a glass frontage, wider aisles, longer checkouts, self-service tills and more customer facilities.

“The discounters have made urban areas a focus for new and revamped stores and for good reason: Mintel’s Supermarkets UK 2016 report asked where consumers spend the most in a typical month and found both Aldi and Lidl attract a lower number of urban shoppers than those living in suburban or rural areas. However, in London, and in particular South London, Lidl has a greater store footprint with a quarter of those living in the capital doing some shopping with Lidl in a typical month, compared to just 16% who use Aldi. This new store format shows that Lidl is still looking to invest in its portfolio to ensure continued growth. Having ample parking is an often overlooked yet crucial part of the shopping experience, with two in five supermarket shoppers saying this is why they spend the most in a typical month in a larger format store.”