Europe’s retailers strive to keep prices low to win struggling shoppers

LONDON, Nov 9 (Reuters) – Some European retailers this week forecast or reported better sales for the full year after working to keep prices low to attract cash-strapped shoppers, while others including Marks & Spencer (MKS.L) and adidas (ADSGn.DE) warned about profits.

Many consumers have turned to cheaper own-brand products, boosting sales by retailers such as Dutch grocer Ahold Delhaize and Primark owner Associated British Foods. (ABF.L)as they face a protracted cost-of-living crisis.

On Wednesday, Ahold raised its annual outlook for the third time this year, expecting low-double-digit earnings-per-share growth versus earlier mid-single-digit guidance.

Ahold’s sales are benefiting from strong performance in the United States, where it operates the Stop & Shop, Giant, Food Lion and Hannaford chains. In Europe, it has been helped by private-label products, said its chief financial officer, Natalie Knight.

“It’s an opportunity for shoppers, if they need to downgrade, to do it inside our stores instead of leaving and going to the discount stores,” he told Reuters.

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

That was driven by accelerating food inflation in markets and an easier comparative period given the impact seen last year from flooding in parts of Europe, Genelot added.

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

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

Carrefour said it would step up its e-commerce expansion, open more discount stores and cut costs while outlining its new turnaround strategy.

In late October, Carrefour raised its cash flow target for 2022 as its hypermarkets benefited from “attractive” low-price deals as shoppers battled inflation.

LUXURY GAP

Having less disposable income means many shoppers are refraining from buying middle-market clothing and other discretionary items.

UK retailer M&S, which sells clothing, home products and groceries, reiterated that 2022 profit would be lower than last year, hurt by higher costs and pressure on household budgets, as it reported a decline in 24% on first half earnings.

Adidas cut its full-year net income forecast in half on Wednesday, blaming its split from the rapper formerly known as Kanye West ahead of the key holiday season.

However, at the higher end of the market, luxury goods makers have been less affected by the deteriorating consumer environment as they report they are making money on their more expensive products and expect to continue to do so.

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

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(This story has been resubmitted to change ‘hold’ to ‘hold’ in paragraph 1)

Reporting by Richa Naidu; Edited by Matt Scuffham and Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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