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Sainsbury's warns of challenging market as Argos sales slide Sainsbury's warns of challenging market as Argos sales slide
(about 2 hours later)
Sainsbury’s has warned of a challenging market as it reported sales in line with expectations despite a tough time for its Argos chain.Sainsbury’s has warned of a challenging market as it reported sales in line with expectations despite a tough time for its Argos chain.
Sales at established stores rose by 1.1% in the three months to 6 January and total sales were up by 1.2%. The company said grocery sales increased by 2.3%, slightly behind the pace of food price inflation, but ahead of its 1.4% growth in the previous quarter. Sales at established stores rose by 1.1% in the three months to 6 January and total sales were up by 1.2%. The company said grocery sales increased by 2.3%, behind the pace of food price inflation, but ahead of the 1.4% growth achieved in the previous quarter.
General merchandise sales fell by 1.4%, but Britain’s second-largest supermarket chain said profits would be moderately ahead of the expectated £559m because it had found more ways to save money by merging its supermarkets with Argos. General merchandise sales fell by 1.4%, largely because of the closure of dozens of Argos outlets in Homebase stores after the catalogue shop’s demerger from the DIY chain.
Sainsbury’s subdued trading figures came as Lidl said it had increased sales by 16% year on year in December. The German discounter said sales of turkeys had risen by 10% and luxury Christmas puddings by 60%. Mike Coupe, the Sainsbury’s chief executive, said Argos had increased its share of a tough market as it sold more games consoles and audio technology but fewer toys. “The market is challenging and there is a bit of squeeze on disposable income. Where [shoppers] are able to defer purchases, they do,” he said.
Clothing sales rose by 1%, compared with 6% growth in the previous quarter. Although sales of winterwear were lower because of the warm autumn, Coupe said Sainsbury’s had increased its market share in clothing.
He said supermarkets were benefiting as people chose to eat at home rather than out to save money but the group had to be “cautious about the outlook, reflective of the consumer environment”.
The group, which is Britain’s second-largest supermarket chain, said profits would be about £28m higher than previous estimates of £559m because cost savings following its takeover of Argos were coming through more rapidly than expected.
Sainsbury’s subdued trading figures came as Lidl said it had increased sales by 16% year on year in December. Bruno Monteyne, an analyst at Bernstein Research estimated that about 10 percentage points of that growth was the result of opening new stores. The German discounter said sales of turkeys had risen by 10% and luxury Christmas puddings by 60%.
Christian Härtnagel, the chief executive of Lidl UK, said: “Lidl UK has had a fantastic 2017 and this was capped by our strongest Christmas trading period to date.”Christian Härtnagel, the chief executive of Lidl UK, said: “Lidl UK has had a fantastic 2017 and this was capped by our strongest Christmas trading period to date.”
The relative performances highlight the scale of the challenge for traditional supermarkets, which all lost market share over Christmas while Lidl and Aldi increased theirs. Both discounters are rapidly opening stores as shoppers look for ways to save money at a time when inflation is outstripping pay rises.The relative performances highlight the scale of the challenge for traditional supermarkets, which all lost market share over Christmas while Lidl and Aldi increased theirs. Both discounters are rapidly opening stores as shoppers look for ways to save money at a time when inflation is outstripping pay rises.
Mike Coupe, the Sainsbury’s chief executive, said: “We delivered an excellent operational performance across the group, with great availability, strong customer satisfaction scores and our lowest level of waste ever at Christmas.” Coupe, said: “We delivered an excellent operational performance across the group, with great availability, strong customer satisfaction scores and our lowest level of waste ever at Christmas.”
He said customers bought more products from Sainsbury’s premium Taste the Difference range and snapped up bags of 25p vegetables before Christmas.He said customers bought more products from Sainsbury’s premium Taste the Difference range and snapped up bags of 25p vegetables before Christmas.
Although sales fell at Argos and clothing sales rose by 1%, compared with 6% in the previous quarter, Coupe said the chain had taken market share. The company said its food price inflation was lower than the 3.7% rate reported by analysts at Kantar Worldpanel but admitted that the volume of groceries sold was slightly down although the number of customer transactions held steady.
“General merchandise and clothing grew market share in a challenging market. Argos stores in Sainsbury’s supermarkets performed particularly well and Argos saw record sales across the Black Friday period,” he said. Coupe said he expected food price inflation to fall away in the next six to nine months, handing more disposable income to shoppers, but he said: “We live in uncertain times. Who knows what will happen in the commodity and currency markets – to some extent that is driven by politics.”
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