What's happened
British retailers report varied performance in early 2026. Dunelm's sales growth slowed, Greggs' sales growth stalled, while Sainsbury's and Tesco posted modest gains amid challenging market conditions. Consumer confidence remains subdued, impacting general merchandise and clothing sales, but grocery market share continues to grow.
What's behind the headline?
The latest retail figures reveal a cautious consumer landscape in the UK. Dunelm's modest sales growth indicates a slowdown after a strong first quarter, likely due to increased discounting and digital competition. Greggs' sales growth stalled, suggesting consumers are managing budgets more tightly and seeking smaller portions or healthier options, amid rising food prices and economic uncertainty. Sainsbury's and Tesco continue to gain market share, driven by strategic investments in value and quality, but their sales growth has slowed compared to previous periods, reflecting subdued spending. The overall picture suggests that while grocery chains are benefiting from consumers eating more at home, the broader retail sector faces headwinds from inflation, increased competition, and cautious spending. The ongoing challenge for retailers will be balancing price competitiveness with profit margins, as consumer confidence remains fragile and inflation pressures persist. The market's resilience will depend on how well these companies adapt to shifting consumer preferences and economic conditions, with grocery sales likely to remain a bright spot in an otherwise subdued retail environment.
What the papers say
The Independent reports that Dunelm's sales growth slowed sharply in its second quarter, with shares plunging 18%, citing challenging macroeconomic conditions and increased digital competition. Similarly, Greggs experienced a slowdown, with like-for-like sales rising only 2.4% for the full year, amid subdued consumer confidence and rising food prices, according to The Independent. Sainsbury's and Tesco posted modest sales increases, with Sainsbury's grocery sales up 5.4% over six weeks, but both faced declines in non-food and clothing sectors, as detailed by Holly Williams. Tesco's market share hit a decade-high, yet its sales performance in key markets was below expectations, as noted by Sarah Butler in The Guardian. Industry analysts suggest that the retail landscape is becoming more competitive, with discount chains like Aldi and Lidl gaining ground, and traditional players adjusting strategies to maintain relevance. The overall narrative indicates a cautious but resilient sector, with grocery chains leading the way amid economic headwinds.
How we got here
The UK retail sector has been navigating a challenging macroeconomic environment, with inflation, rising costs, and subdued consumer confidence affecting sales. Major chains like Tesco, Sainsbury's, Greggs, and Dunelm have reported varying results, influenced by competitive pressures and changing consumer behaviors, especially around festive shopping.
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Tesco plc, trading as Tesco, is a British multinational groceries and general merchandise retailer with headquarters in Welwyn Garden City, Hertfordshire, England, United Kingdom.
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