Consumer squeeze hits Sainsbury’s sales growth
● Like-for-like sales rise slows to 0.6% in quarter ● ‘We are holding our own’, says chief executive
Sainsbury’s, the UK’S second largest supermarket group, has seen sales growth slow in its latest trading quarter, sparking a fall in half-year earnings.
The group, which has about 50 larger stores in Scotland, yesterday reported a 0.6 per cent rise in like-for-like sales over the second quarter – down from 2.3 per cent in the previous three months.
Sainsbury’s gave warning of a “challenging” general merchandise market and also revealed sales slowing across its core grocery arm.
Underlying pre-tax profits came in at £251 million for the six months to 23 September, down from £277m in the same period of 2016.
City food retailing analysts said that the company was being squeezed between intense price competition and weak consumer spending, the latter potentially aggravated last week by the first base rate rise in ten years by the Bank of England, to 0.5 per cent from 0.25 per cent.
They also said Sainsbury’s and its rivals were having to cope with dearer food imports due to a weaker pound since the UK voted last year to depart the European Union. Sainsbury’s group chief executive Mike Coupe partly blamed a wet August for the sales slowdown, saying non-food sales were also hit by the closure of 100 Argos in Homebase stores following the DIY chain’s takeover by Australia’s Bunnings.
However, it has added more than 100 Argos stores within supermarkets, with another 50-plus to open by Christmas, while rolling out “click and collect” nationwide.
Coupe said shoppers were “very cost-conscious at the moment”, although two bright spots were clothing – where sales rose 6.3 per cent – and online groceries, up 7 per cent.
He said: “If you look at the more recent market data, we are at least holding our own, if not performing better than the overall market.
“While the market remains competitive, we are well placed to navigate the external environment.”
Sainsbury’s said it was on track for full-year profit expectations of £572m, which would be 2 per cent down on the previous year’s results.
Yesterday’s figures came a month after Sainsbury’s announced 2,000 job cuts, mainly from personnel and payroll. as part of efforts to slash another £500m off costs over three financial years from 2018-19.
Analysts at Bernstein said the supermarket giant’s Q2 performance was 1.3 per cent below the consensus expectation. Halfords yesterday revealed that half-year profits took a knock from increased costs linked to the Brexit-buffeted pound. The car parts and bicycles retailer said that pre-tax profit fell 6.4 per cent to £36.6 million in the six months to 29 September, while underlying pre-tax profit slipped 9.8 per cent to £36.8m. Sales rose 3.8 per cent to £588.7m, but Halfords booked £15m of additional costs as the pound’s descent since the referendum saw its purchasing power plummet.