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

The Scotsman - - Business - By MARTIN FLANA­GAN

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.

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