Strong trading updates from Marks & Spencer and Tesco on Thursday confirmed that retailers were the big winners this Christmas as the rapid spread of Omicron prompted people to eat and drink more at home instead of heading out to restaurants and pubs.
However, Tesco and M&S joined the likes of Sainsbury’s in warning of rising prices for shoppers in the months ahead, as costs of shipping and raw ingredients were increasing and supply chain difficulties expected to continue for some months.
“We will continue to see lumps and bumps through the next quarter,” said Steve Rowe, the chief executive of M&S, who said some price rises were inevitable later in the year. “The pressures have come down slightly as we have passed the peak but there are still some issues with shortages of labour and continuing [staff] absence.”
Tesco said cost inflation was running at about 5%, but it was working closely with suppliers to make efficiencies so that not all of this would be passed on to shoppers.
Increases in pay for workers in stores, warehouses and delivery networks are also expected to rise as staffing shortages prompted by Brexit are made worse by absences related to the pandemic.
Tesco and M&S said they would be negotiating with unions and expected to increase pay as rivals including Sainsbury’s, Aldi and Lidl have already pledged to pay more than £10 an hour from this spring.
Rowe said: “Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value.
“Food has maintained its momentum, outperforming the market over both 12 and 24 months. The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance.
The boost to food retailers from the Omicron wave was also confirmed by Tesco.
The UK’s biggest supermarket said sales rose 0.6% in the three months to 8 January – compared with the same period a year before. Tesco increased sales on 2020 when supermarket sales were boosted by the closure of hospitality businesses for many weeks across the UK.
Ken Murphy, the chief executive of Tesco, saidthe supermarket continued to invest to protect availability of goods.
“This put us in a strong position to meet customers’ needs as, once again, Covid-19 led to a greater focus on celebrating at home. As a result, we outperformed the market, growing market share and strengthening our value position.”