Sainsbury’s sales fall sparks worrying share price tumble
Supermarket chain chief is still upbeat on prospects over the longer term
J SAINSBURY failed to cheer investors after like-for-like sales fell for a second quarter in a row, sending shares in the supermarket tumbling down nearly four per cent.
The grocer, which has 97 stores in Scotland, cited food price deflation and ongoing pressure on pricing as like for like sales dropped by 1.1 per cent in the 16 weeks to September 24.
And it blamed a “back to front” summer season for a “slight sales decline” in its clothing business, although it noted that the operation –the UK’s sixth biggest clothing retailer by volume – continued to gain market share. Sales of general merchandise grew by more than four per cent.
Asked whether he was concerned that Sainsbury’s was losing ground in the grocery sector to a recovering Morrisons and Tesco, chief executive Mike Coupe said “we stand by our track record”. He stated that Sainsbury’s had “broadly” held market share in the past year while others had lost ground.
“Of course there will be bounces in any particular quarter, it was ever thus, it has always been the case,” Mr Coupe said. “But if you look at our track record over the best part of five or six years, we have consistently outperformed our supermarket peers.”
He added: “You could argue some of our competitors are coming from a lower base.”
Despite the second successive fall in like-for-like sales, Sainsbury’s gave an upbeat assessment of its performance.
It noted that the quarter had seen growth in like-for-like transactions and total volume growth across its supermarket, convenience store and online grocery operations, which grew by seven per cent and eight per cent respectively. Its convenience business recorded its best ever week during the quarter.
The retailer also underlined its confidence in the £1.4 billion acquisition of Argos owner Home Retail Group, which it completed during the quarter.
Sainsbury’s said Argos saw likefor-like sales growth of 2.3 per cent and total sales growth of three per cent for the quarter ended August 27.
With the acquisition only completing on September 2, the company was unable to provide any “colour” on sales trends within Argos stores. But it noted it will have 30 Argos concessions in Sainsbury’s stores by Christmas, having installed 15 to date, adding that it will have 200 click and collect points in store by the end of the year. Habitat concessions will also have been trialled in five stores by then.
Mr Coupe said the impact of sterling’s devaluation since the Brexit vote was still “unclear”, adding that the company has still to see any significant change in its customers’ behaviour since the UK voted to leave the European Union.
Meanwhile, Mr Coupe refuted the suggestion that Sainsbury’s diversification into non-food retailing with Argos would cause it to be “distracted” from its core grocery activities.
He signalled that Sainsbury’s is investing to improve product quality, to relaunch 3,000 product lines, and targeted price cuts, part of its defence against the discounters Aldi and Lidl.
He also said it is improving its convenience and online business through activities such as same-day delivery.
“There is no doubt in our minds convenience and particularly speed is one of the big issues that will drive retail businesses over the next period of time,” Mr Coupe said.
“That’s one of the reasons we acquired Argos – the ability to deliver 90,000 products virtually anywhere in the UK within four hours we think is an opportunity for competitive advantage in the future.
“The same is happening with groceries online as well.”
Shares closed down 9.8p at 241p.