BUSINESS LIVE: Cost-of-living crisis drives record Aldi UK sales


BUSINESS LIVE: Cost-of-living crisis drives record Aldi UK sales

The FTSE 100 is down 0.6 per cent in midday trading. Among the companies with reports and trading updates today are Aldi UK, Aviva and Entain. Read the Monday 25 September Business Live blog below.

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Aviva to buy AIG’s UK protection business for £460m

Aldi UK ramps-up investment as discounter achieves record sales

Aldi UK has ramped-up its investment plans with £1.4billion of spending earmarked for the next two years after sales soared to record levels amid the cost-of-living crisis.

The German discount grocer, which opened its first store in 1990, saw annual sales increase by almost £2billion to £15.5billion for the year to December 2022, reflecting growth of more than 17 per cent and a new record in its 33-year history.

Regulation and weaker trade weighs on Entain revenues

Victoria Scholar, head of investment at Interactive Investor:

‘Entain warned that is expects online gaming revenues to drop in the third quarter and the full year. Its annual growth forecast has dropped from low to mid-single digit to a low single digit percentage. But it maintained its full-year EBITDA guidance of £1 billion – £1.05 billion.

‘The update has sent shares in Ladbrokes’ parent company sharply lower to a more than one-year low. Increased regulatory headwinds in the UK are weighing on its revenues.

‘The gambling firm has also been grappling with weakness in Italy and Australia as well as weaker sports margins because of adverse sporting results. It said its online business has also performed softer than expected in the third quarter.

‘Shares in Entain have sharply underperformed UK markets in 2023, shedding over a quarter of their value year-to-date. Despite this, most analysts still retain their positive recommendations on the stock with 20 buys versus one hold and zero sells.’

‘Twin worries’ if Chinese economic fragility and high interest rates weigh on markets

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

‘The twin worries about the ongoing fragility in China’s economy and high interest rates lingering for longer in the United States have quashed hopes of a dose of Monday motivation to start the week. The FTSE 100 has opened in the red, with miners among the companies on the back foot.

‘The deep problems in the Chinese property sector have bubbled to the surface again provoking fresh unease about the structural faults running though the world’s second largest economy.

‘The sprawling real estate giant Evergrande has run into a roadblock in its attempts to restructure its debt, with expectations of new restructured debt being issued now scuppered by an ongoing official investigation into its major subsidiary, Hengda.

‘There had been hopes that intricate financial engineering will stop the property sectors woes from overflowing to other sectors, but doubts have crept back in about the long-term effectiveness of this tinkering.

‘So far renewed concerns about the snare of problems in China isn’t having a marked effect on oil, with prices edging up as the focus switches again to supply worries.

‘Brent Crude has headed back above $94 dollars a barrel, having dipped last week on expectations of slowing demand as tight monetary policy in the US looked set to continue. Sentiment appears to be shifting back to the effect of Saudi Arabia and Russia’s production cuts, and as oil prices creep back up worries about inflation do too.’

Market open: FTSE 100 down 0.3%; FTSE 250 off 0.4%

London listed stocks are down in early trading in a grim start to the last week of the quarter for global markets, while Ladbrokes owner Entain has tumbled to over a year’s low after issuing a warning about its online gaming sales.

Entain has slipped 4.5 per cent after saying it expects third-quarter online net gaming revenue to be down by ‘high single digit percent’ on a pro-forma basis due to softer-than-anticipated growth in Australia and Italy.

The travel and leisure index housing the gambling firm has dropped 1.9 per cent.

Among other movers, Aviva is down 0.7 per cent after the life insurance firm said it agreed to acquire the UK protection business of AIG for £460million.

The life insurance sector is off 1.2 per cent.

Upbeat Oliver Bonas bags £9m profit

Consumer shifts drive record Aldi UK sales

Neil Shah, director at Edison Group:

‘Aldi’s record profits owe a lot to its supermarket sweep of UK households, with two-thirds now shopping at the German discount supermarket giant.

‘Aldi UK’s burgeoning growth, marked by a 17.1 per cent increase in sales at £15.5 billion last year, is significantly attributed to consumer shifts during the ongoing cost-of-living crisis, with a heightened preference for economical own-label products.

‘The business is amplifying its investment to £1.4 billion through 2024, following a significant uptick in 2022 profits. This announcement is synchronous with Aldi UK inaugurating its 1,000th store and revising its target to 1,500, signalling robust growth and expansive market strategies. The refined investment will predominantly fund the expansion and refinement of stores and distribution networks and technology enhancement.

‘Aldi, surpassing Morrisons, now ranks as the UK’s fourth-largest supermarket and, along with Lidl, is manifesting rapid growth, altering shopping habits, and cementing its position in the market by drawing in value-seeking consumers.

‘This fortified market stance underscores Aldi’s commitment to offering value-driven, cost-effective alternatives, attracting nearly a million new customers in a year.’

Entain outlook weakens

Ladbrokes owner Entain expects third-quarter online net gaming revenue to be down by ‘high single digit percent’ on a pro-forma basis, citing regulatory headwinds and slower-than-expected growth in Australia and Italy.

Entain, which also owns Coral betting shops, added it expects group online gaming revenue for the full year to be down ‘low single digit percent’ on a pro-forma basis.

The company had earlier forecast annual growth in the mid-teens for online gaming revenue, including the acquisitions of STS Holdings and Angstrom Sports, which is expected to close in the second half of 2023.

‘We continue to see good underlying growth in our online business and are reiterating our EBITDA guidance for the year despite softer than expected revenue growth in Q3 and the ongoing roll-out of industry-leading safer gambling measures,’ CEO Jette Nygaard-Andersen said in a statement.

Builders warn of 50,000 fall in new homes

Aviva to buy AIG Life for £460m

Aviva has agreed to acquire the UK protection business of AIG for £460million.

Aviva said on Monday it would buy the unit – known as AIG Life UK – from Corebridge Financial, a New York-listed subsidiary of AIG.

Amanda Blanc, CEO of Aviva, said the deal would strengthen the FTSE 100 company’s position in an attractive market and help position it for ‘capital-light growth’.

The transaction will add 1.3 million individual protection customers and 1.4 million group protection members, Aviva said, with the deal expected to close in the first half of 2024, subject to regulatory approvals.

The deal would represent around a 5 percentage point cut to Aviva’s group solvency II cover ratio, the company said.

Marks & Spencer to sell Adidas and Sweaty Betty online

Marks & Spencer has teamed up with Adidas and Sweaty Betty as it extends its ‘brands’ strategy.

More than 150 products across the two sportswear brands will launch on M&S’ dedicated Sports Edit platform in early October.

M&S is hoping to drive online growth by selling third party brands, with upcoming additions including Columbia, Regatta and Sorel.

Cost-of-living crisis drives record Aldi UK sales

Aldi UK delivered record sales of £15.5billion last year, reflecting growth of 17.1 per cent, as the German discounter benefited from the ongoing cost-of-living crisis.

The business said it would invest £1.4billion in the two-year period to the end of 2024.

Giles Hurley, chief executive of Aldi UK and Ireland, said:

‘Although inflation is easing, households are still under real pressure from higher living costs. As a result, Britain is shopping very differently to how it did 18 months ago – fewer trips, more own label products, and switching supermarkets in search of better value.

‘What we’re seeing is a new generation of savvy shoppers who’ve turned their back on traditional, full-price supermarkets in favour of transparent, low prices, which is what we’re famous for. That’s why we’re still welcoming more and more customers through our doors – people who come to us for our low prices but stay for the award-winning quality of our exclusive brands.

‘Shoppers know they’ll always get more for their money at Aldi. That’s a promise we’ve kept for more than 30 years.’

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