Supermarket sales slide into reverse as price war hits petrol pumps

Kasmira Jefford
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Supermarkets are slashing the cost of petrol (Source: Getty)
A fierce supermarket price war at both the tills and the petrol pumps has caused sales in the sector to shrink for the first time since records began over 20 years ago.

With retailers kicking off another round of petrol price cuts today, fresh data shows how supermarket giants’ troubles are dragging on the UK’s top share indexes.

“As a result of the ongoing price war, supermarkets saw sales fall 2.1 per cent, down £2.3bn, the first fall since records began in 1994,” said a report by The Share Centre. The numbers refer to FTSE 350 companies with year-ends up to 31 March and that reported during the second quarter.

“The price war in the supermarket industry is just the latest in the long succession of difficulties to hit the UK’s largest stocks,” added analyst Helal Miah. “These big multinationals are much less able to benefit from the strong performance of the UK economy. This has taken a heavy toll, with top 100 profits no higher than they were five years ago. It’s no wonder the FTSE 100 has been range-bound for the last two years.”

Meanwhile, supermarkets are slashing the cost of petrol.

Morrisons and Asda became the latest retailers to announce fuel price cuts starting from today, following announcements by Tesco and Sainsbury’s at the end of last week.

Bradford-based Morrisons will reduce the price of diesel by up to 4p a litre, and unleaded by up to 1p a litre. This will take the average cost of diesel and unleaded at its 336 forecourts to 107p and 112p respectively.

Meanwhile, Asda said it will knock a penny off the cost of a litre of diesel, meaning drivers at its 272 petrol stations will pay no more than 107.7p per litre on diesel and 111.7p on unleaded.

The big four accounted for nearly half of all petrol sold in the UK, according to a snapshot of the industry taken in October 2014 by the Petrol Retailers Association, with a 43.6 per cent share. The price cuts follow a sharp reduction in global oil prices over the last year.

Shore Capital analyst Clive Black told City A.M.: “The dismal time faced by the major supermarkets is bound to weigh on the sector’s relative performance. Ongoing attempts to stall the discounters’ momentum and now commodity price driven deflation means that the absolute and relative pain is not over.”

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