European retailers scramble to keep prices low to attract struggling shoppers

By Richa Naidu

LONDON (Reuters) – Some European retailers forecast or reported better sales for the year this week after struggling to keep prices low to attract cash-strapped shoppers, although others , including Marks & Spencer and Adidas, have warned of profits.

Many consumers have turned to cheaper private label products, boosting sales at retailers like Dutch grocer Ahold Delhaize and Primark owner Associated British Foods as they face a protracted slump in the cost of life.

On Wednesday, Ahold raised its full-year outlook for the third time this year, expecting low double-digit growth in earnings per share from an earlier single-digit forecast.

Ahold’s sales benefited from a good performance in the United States, where it operates the Stop & Shop, Giant, Food Lion and Hannaford brands. In Europe, it was helped by private label products, said its chief financial officer Natalie Knight.

“This is an opportunity for shoppers, if they need to downgrade, to do so in our stores rather than leaving and going to discounters,” she told Reuters.

Ahold also reported a 7.4% increase in same-store sales in Europe in the third quarter compared to forecasts of a 4.4% increase, said analyst Clément Genelot of Bryan, Garnier & Co.

This is due to accelerating food inflation in markets and an easier comparison period given the impact seen last year with flooding in parts of Europe, Genelot added.

AB Foods, owner of discount fashion chain Primark, reported a 42% increase in profits in 2021-22 on Tuesday. The company, which sells women’s tops for as little as £1.80 each, said it would limit price increases beyond those already planned.

Carrefour, Europe’s largest food retailer, pledged on Tuesday to increase the share of private label products in its food sales to 40% in 2026 from 33% in 2022 and to accelerate the expansion of discount stores in France and Brazil. .

Carrefour said it would accelerate its e-commerce expansion, open more discount stores and cut costs as it details its new turnaround strategy.

In late October, Carrefour raised its 2022 cash target as its hypermarkets benefited from “attractive” low-cost offers as shoppers grappled with inflation.

LUXURY GAP

Having less disposable income means many shoppers are hesitant to buy mid-market clothing and other discretionary items.

British retailer M&S, which sells clothing, home goods and groceries, reiterated that 2022 profits would be lower than last year, hurt by rising costs and pressure on household budgets, as it announced a 24% drop in first-half profits.

Adidas halved its full-year net profit forecast on Wednesday, blaming its split from the rapper formerly known as Kanye West ahead of the key Christmas season.

However, at the high end of the market, luxury goods makers have been less affected by the deteriorating consumer environment, saying they are making money from their more expensive products and planning to continue to do so.

Wealthier consumers are still sitting on a savings cushion built up during the COVID-19 pandemic and some are keen to indulge after two years of restrictions.

($1 = 0.9929 euros)

(This story has been reclassified to change ‘keep’ to ‘keep’, in paragraph 1)

(Reporting by Richa Naidu; Editing by Matt Scuffham and Alexander Smith)

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