Tesco drops and Sainsbury's gains as retail sales hit by pre-Budget jitters

Grocery market data showed subdued spending ahead of the Autumn Budget: grocery price inflation held at 4.7% and supermarket sales rose 3.4% over the latest four-week period, with Tesco’s 12‑week sales growth slowing to 4.7% (market share 28.3%) while Sainsbury’s held at 5.1% (16.0% share); discounters and M&S outperformed (Aldi 10.5%, Lidl continued double‑digit growth, M&S take‑home +8.9%) as Asda’s sales declined 4.3%. Broader measures pointed to weakening consumer demand into November — Barclays household card spending fell 1.1% year‑on‑year (the steepest drop since Feb 2021) and the BRC/KPMG monitor showed total retail sales growth at 1.4% and like‑for‑like sales up 1.2% (below forecasts), with food +3.0% and non‑food just +0.1%. Analysts and industry bodies attributed the softness to “pre‑Budget jitters,” heightened promotional activity, and adverse weather, implying continued pressure on discretionary retail and margins, potential further share gains for value retailers, and upside risk to food price‑led value growth.

Analysis

Numerator (formerly Kantar) supermarket till data show grocery price inflation steady at 4.7% and supermarket sales up 3.4% over the latest four-week period, below inflation, reflecting promotional activity and subdued real-volume demand. Tesco’s 12-week sales growth slowed to 4.7% from 5.9% in the prior report and its market share is 28.3%, while Sainsbury’s held stronger with 5.1% growth and a 16.0% share; Marks & Spencer take-home sales rose 8.9%, discounters (Aldi 10.5%, Lidl double-digit) and M&S outperformed, and Asda saw sales decline 4.3% to an 11.5% share.

Wider retail indicators point to weakening consumer activity: Barclays household card spending fell 1.1% year‑on‑year (the steepest drop since Feb 2021), BRC/KPMG retail growth slowed to 1.4% with like‑for‑like sales +1.2% (below 2.5% expectations), food sales +3.0% and non‑food only +0.1%. Commentators attribute the softness to pre‑Budget jitters, heavier promotions, adverse weather and weak Black Friday conversion, implying pressure on discretionary categories and on retailers’ margins if promotional intensity continues.

Near term, market reaction—Tesco shares down and Sainsbury’s up—reflects stock‑specific sensitivity to these sales trends; key risks include further cuts in card spending and any Budget announcements that affect household budgets or inflation dynamics. Investors should monitor upcoming Numerator/BRC/KPMG releases and Barclays card data as near‑term catalysts for retail earnings and guidance revisions.

Key Decisions for Investors

• Trim or avoid incremental exposure to Tesco until subsequent 12‑week sales prints or management commentary confirm stabilization, given its growth slowdown to 4.7% and the negative market reaction
• Consider adding or maintaining exposure to Sainsbury's and M&S where sales resilience (SBRY +5.1% 12 weeks; M&S take‑home +8.9%) contrasts with discretionary weakness, but keep position sizes moderate given macro downside
• Hedge or underweight discretionary/non‑food retail exposure and monitor Barclays household card spending, BRC/KPMG like‑for‑like sales, and Autumn Budget announcements as key catalysts that could materially change consumer demand and margins