Discount retail back in fashion as consumers adjust to austere times

Cut-price supermarkets and value retailers see upswing

Despite a dreadful start to the year for the high street, consumers are spending strongly again in one part of the retail sector, with Britain's discount grocers and Primark, the value fashion chain, welcoming ever more bargain hunters in austerity Britain.

Aldi and Lidl, the discounters known for their cheap prices and limited number of products, posted record market shares yesterday to continue their return to form over recent months, according to the closely followed Kantar World panel data. Meanwhile, Primark, the clothing juggernaut that surprised the market with a slowdown in UK sales earlier this year, said customers had come back with gusto since the end of February.

"It really feels like shoppers have come out for Easter and we havereturned to the sales growth of previous years," said George Weston, the chief executive of Primark's owner, Associated British Foods. "We outperformed the bulk of the high street in the difficult times and we are outperforming them again." Primark's underlying sales rose by 3 per cent for the 24 weeks to 5 March.

However, Primark, which has 214 shops, including in Germany and Spain, warned that it would not be able to pass on higher costs to customers if it wanted to keep their business. The retailer said its operating profit margin was lower in the first half due to the increase in VAT and higher cotton prices, and that it expected further declines in the second half, as well as the likelihood of "continued weakness in UK consumer demand".

The upswing at Aldi and Lidl is arepeat of the spike in sales seen at both during the last recession and an almost equally dramatic loss of trade once it had ended, as shoppers returned to the big UK grocers.

Kantar said yesterday that Aldi and Lidl had delivered record market share of 3.3 per cent and 2.6 per cent respectively for the 12 weeks to 17 April.

Edward Garner, a director at Kantar, said: "While in comparison to other major outlets Aldi and Lidl's basket sizes remain relatively small, there is no doubt that these two retailers are now taking a larger portion of shoppers' spending." However, he cautioned that for now at least their performance was being driven by existing customers "sharply" increasing their spending, as opposed to a "re-run of 2008" when new shoppers flocked to their outlets.

Aldi's sales soared by 25.7 per cent for the 12 weeks to 28 December 2008. While the same discounter's sales rose by a more modest 15 per cent over the latest period, this still outstripped Tesco's growth of 3.2 per cent, Asda's 2.5 per cent, Sainsbury's 3.3 per cent and Morrisons' 4 per cent.

Clive Black, a retail analyst at Shore Capital, said: "The 'have nots' are continuing to search around for value, and not just because the discounters have a reputation for value for money. They also offer a limited range of products which removes temptation for shoppers."

Mr Black said there was a "polarisation" in the grocery sector between the "have-nots" and "haves" – or consumers not threatened by their economic circumstances – supported by a strong 7.7 per cent jump in sales at Waitrose, according to Kantar, androbust recent food figures from Marks & Spencer.

Still, the carnage on the high street continued yesterday. Carpetright, the floor coverings retailer, unveiled its second profits warning in a month. It also warned of similar cost pressures to Primark. The company has faced a 12 per cent rise in the price of polypropylene – the raw material for the 70 per cent of UK carpets that are man-made – in the last year, and warned that it had no choice but to pass most of this rise on to consumers.

On the outlook for its market, Neil Page, Carpetright's finance director, said: "We expect it to remain very difficult throughout 2011." He warned that he did not expect to see signs of a "real recovery" until 2013.

Game Group also disappointed,revealing a sharp drop in its sales in the first few months of the year, though it expects some improvements.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral