FEELING THE PINCH
Grocer reveals sales growth slowing
Sainsbury’s suffers another drop in profits as it sees sales growth slowing
SAINSBURY’S HAS reported slowing sales growth and a 9 per cent fall in half year profits after moves to keep prices low amid fierce competition in the market.
The fourth consecutive decline in profits also reflects the inclusion of seasonal losses from Argos in the results.
The group reported underlying pre-tax profits of £251m in the six months to September 23.
Falling sales across general merchandise and Argos meant like-for-like sales rose just 0.6 per cent in the second quarter, down from growth of 2.3 per cent in the first three months.
Total general merchandise sales fell 1.6 per cent in the second quarter and total grocery sales growth more than halved to 1.4 per cent from 3 per cent in the first quarter.
Clothing sales were the bright spot, with a 6.3 per cent increase and online grocery sales rose 7 per cent.
Chief executive Mike Coupe said the market remains competitive, but added the group is seeing clear results of its three-year plan. “We have delivered a good performance across the group in the last six months, with more customers choosing to shop at Sainsbury’s in the first half than ever before,” he said.
“We are now three years into delivering our differentiated strategy and are seeing clear results.”
He added that the company is on track for full-year profit expectations of £572m, which would mark a 2 per cent fall on last year’s results.
Sainsbury‘s bought Argos in September 2016.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said Sainsbury’s was facing industrywide headwinds.
“Consumer spending is under pressure from higher inflation, while it’s costing supermarkets more to fill their shelves with stock,” he said.
Mr Coupe said non-food sales were knocked by the closure of 100 Argos in Homebase stores following the DIY chain’s takeover by Bunnings.
But he also blamed “soggy” August weather for tougher trading, saying the end of the summer was a “wipe-out”.
Sainsbury’s is putting faith in a Christmas line-up of products, including a star-dusted snow globe sandwich and its awardwinning champagne, plus the roll-out of 165 Argos stores within supermarkets to help drive a solid festive season.
Mr Coupe said that while shoppers are “very cost-conscious at the moment”, they are expected to “put their hands in their pockets and have a great Christmas”.
The figures come a month after Sainsbury’s announced 2,000 jobs will go, mainly from human resources and payroll staff, adding to 1,000 head office job cuts in August, as part of efforts to cut another £500 m in costs over the next few years.
All the big supermarkets have announced job cuts as they look to compete with the discounters Aldi and Lidl.
We are now three years into delivering our differentiated strategy. Mike Coupe, chief executive of Sainsbury’s