Sainsbury’s sales down 1.1% as price deflation still stalks aisles
● But new Argos subsidiary sees revenues rise 2.3% in ‘promising’ sign
Sainsbury’s unveiled a second successive quarterly fall in sales yesterday as the numbers bore the scars of rife price promotions in the industry and food price deflation.
However, there were stronger sales at the Argos homewares business that Sainsbury’s acquired for £1.4 billion earlier this year.
Britain’s second biggest supermarket business reported a 1.1 per cent drop in likefor-like sales excluding fuel for the second quarter to 24 September.
Sainsbury’s, which has about 50 major Scottish stores, said that it aimed to “remain competitive”, a strategy involving further investments in the prices of everyday items such as broccoli, onions and its frozen deep pan Margherita pizza.
Mike Coupe, group chief executive, said: “We continue to make progress against our strategy and, while likefor-like sales were down 1.1 per cent, driven by food price deflation, we delivered likefor-like transaction growth across all channels and total volume growth.”
He said that same-floorspace sales at Argos rose 2.3 per cent in the latest quarter, and that the company will open 200 new digital collection points by the end of the year. Thirty Argos digital outlets will be open in Sainsbury’s stores by Christmas.
The food retailer is battling its big three rivals – Tesco, Asda and Morrisons – as well as German discounters Lidl and Aldi in a chronic price war that has squeezed profit margins in the industry.
However, City retail analysts believe Sainsbury’s is in danger of losing ground and might be particularly vulnerable to an expected new price-cutting round from a struggling Asda by the end of 2016.
Julie Palmer, partner and retail expert at Begbies Traynor, said: “Yet again, Sainsbury’s has failed to turn around its weak sales performance, in stark contrast to the recent momentum seen by two of its largest competitors, Morrisons and Tesco, whose recovery seems to be gathering pace.”
However, Palmer said the sales figures at Argos looked “promising”.