UK Grocers & Apparel Retail: Sainsbury's Up, Tesco Down

The latest quarterly Kantar data on apparel in the UK provided another glimpse of the rapidly diverging fortunes of Tesco and Sainsbury’s. The UK apparel market itself was quite robust: it grew +3.1% in the 24 weeks to May 11th, an accelerated rate compared to the prior period and +160bps above its five-year average of +1.4%.   Tesco's sales declined 0.3% in the period, well below the market growth, resulting in 10bps YoY market share decline to 2.9% and its lowest apparel market share in seven years. Sainsbury's sales grew 14.8% in the period, leading to 20bps of market share gain to 1.9%, the 31st consecutive period of market share gains.   Sainsbury's strength in clothing reflects its strength in food retailing: slightly higher price points and ongoing market share gains. Tesco is cheaper than Sainsbury's. . . but still more expensive than the value retailers Asda and Primark. Similar to food, Tesco's market share loss is accelerating with no signs of its turnaround plan working yet, despite being 2 to 3 years into it. We rate Sainsbury's Outperform (PT £4.00) and Tesco Underperform (PT £2.75).   Bernstein Research