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Sainsbury's sales fall for sixth consecutive quarter Sainsbury's sales fall for sixth consecutive quarter
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The supermarket price war has taken a further toll on Sainsbury’s as the chain reported its sixth quarter of falling sales.The supermarket price war has taken a further toll on Sainsbury’s as the chain reported its sixth quarter of falling sales.
Like-for-like sales at the supermarket group fell 2.1% in the three months to 6 June excluding petrol, which is slightly better than analysts’ expectations. Including petrol, sales were down 3.7%.Like-for-like sales at the supermarket group fell 2.1% in the three months to 6 June excluding petrol, which is slightly better than analysts’ expectations. Including petrol, sales were down 3.7%.
Sainsbury’s has pledged to spend £150m on price cuts this year, as it fights back against the discounters, led by Aldi and Lidl. Sainsbury’s also blamed food deflation for the pressure on revenues, with strong harvests around the world pushing prices of food commodities lower. Morrisons became the latest grocer to unveil a new round of price cuts on Monday, reducing the cost of 200 items. City analyst Nick Bubb said: “It is, as usual, not quite as bad as expected and the headline message is ‘progressing well with our strategy’.”
Sainsbury’s chief executive, Mike Coupe, said: “Trading conditions are still being impacted by strong levels of food deflation and a highly competitive pricing backdrop. These pressures, including the effect of our own targeted price investment, have led to a fall in like-for-like sales for the quarter.” Sainsbury’s has pledged to spend £150m on price cuts this year as it fights back against the discount chains, led by Aldi and Lidl. Morrisons became the latest grocer to unveil a new round of price cuts on Monday, reducing the cost of 200 items.
He said he was “encouraged by some of the early trends that we are seeing in our key trading and operational metrics” since the company’s strategic review in November. Sainsbury’s also blamed food deflation for the pressure on revenues, with strong harvests around the world pushing prices of food commodities lower. The company’s chief executive, Mike Coupe, reiterated that food price deflation, which is currently running at 2-2.5%, would continue until at least the end of 2015 and probably into next year.
Sainsbury’s reported its first annual loss in a decade in March after writing down the value of its stores and property assets. To save money, it is cutting 800 jobs in its stores. Rivals Morrisons, Asda and Tesco have also been laying off thousands of store managers. Coupe said: “Trading conditions are still being impacted by strong levels of food deflation and a highly competitive pricing backdrop … Virtually every week someone announces something on prices. We’ve taken action, and our pricing position has never been sharper.”
He added that sales volume and transaction growth had started to improve, following the company’s strategic review in November. He was hopeful that Sainsbury’s would benefit from a rise in disposable household incomes. He said people had on average £16 more a week in their pockets after all bills were paid: “As soon as customers have more money they tend to eat out more, but eventually they start trading up with the supermarkets.”
Sainsbury’s reported its first annual loss in a decade in March after writing down the value of its stores and property assets. To save money, it is cutting 800 jobs in its stores. Rivals Morrisons, Asda and Tesco have also been laying off thousands of store managers. Coupe denied that the job cuts and changes to shift patterns would affect customer service.
One retail analyst said Sainsbury’s biggest threat remained Tesco, which is reviving its UK operations under chief executive Dave Lewis. Phil Dorrell, partner at Retail Remedy retail consultants, said: “Although there is much talk of the rise of Lidl and Aldi, Sainsbury’s biggest threat is from a resurgent Tesco.”One retail analyst said Sainsbury’s biggest threat remained Tesco, which is reviving its UK operations under chief executive Dave Lewis. Phil Dorrell, partner at Retail Remedy retail consultants, said: “Although there is much talk of the rise of Lidl and Aldi, Sainsbury’s biggest threat is from a resurgent Tesco.”
He added: “Sainsbury’s has a broad and varied store portfolio, able to compete in most markets. They just need to re-establish the compelling reason to shop at Sainsbury’s, which was always about quality. They still have that quality, they just don’t shout about it anymore.”
Sainsbury’s opened 10 new convenience stores in the past three months and wants to accelerate this, opening one or two every week.
Analysts at Jefferies said: “Pricing activity across the industry has been focused on further eroding the pricing advantage of discounters from 20-25% a year ago to closer to 10-15% now. Part of this investment has been funded by inflation in non-discounter impacted products.
“From Sainsbury’s perspective, continued progress on reducing promotional activity (to closer to 30% of sales from a peak of 40% in the past) has also contributed. Another important comment was the likelihood that price deflation may turn into mild inflation most likely in the early stages of 2016.”