Consumer sentiment in Britain has deteriorated since Christmas and there is little prospect of an improvement until at least the end of the year, the finance director of Wm Morrison Supermarkets told Reuters. Richard Pennycook said in an interview on the sidelines of the Retail Week conference that growth in Britain's grocery market would stay low this year, following a sales increase of less than 1 percent from stores open over a year in 2010.
"It definitely feels to us as though there's another dip in consumer sentiment ... and we can see that at the moment," Pennycook said. "We were surprised how well Christmas went ... and we expected things to head rapidly south again, and that's what's happened." Pennycook's cautious comments echo remarks from other retail leaders at the conference, who are worried that rising prices, taxes and public spending cuts will hit consumers hard this year.
Richard Brasher, the UK head of supermarket group Tesco, told delegates that recent rises in petrol prices were equivalent to a 5 percent increase in income tax for the chain's poorest customers. Pennycook said there was still some volume growth in the grocery market, driven by a high level of promotions. Grocery price inflation, meanwhile, remained much lower than that suggested by official data as retailers were absorbing some of the pain by cutting costs and shoppers were switching to cheaper products, goods on promotion or less affected items.
"Everyone is working very hard to offset those inflationary headwinds, so actually there's not that much inflation in stores," he said. Pennycook said Morrisons' track record of cutting costs and its expansion plans meant it could still thrive in a low growth environment, noting it reported a 13 percent rise in annual profit last week despite an increase in like-for-like sales, excluding fuel and VAT sales tax, of just 0.9 percent. That underlying sales growth was just ahead of the broader UK grocery market, he said.