Drop in de­mand for toys, elec­tri­cal goods hits su­per­mar­ket

The Gulf Today - Business - - FRONT PAGE -

LON­DON: Sains­bury’s, Bri­tain’s No. 2 su­per­mar­ket group, re­ported a big­ger-than-ex­pected fall in Christ­mas sales, hit by a drop in de­mand for toys and elec­tri­cal goods that could sig­nal a bleak fes­tive sea­son for the broader re­tail in­dus­try.

“I sus­pect that by the time we get to the end of the re­port­ing sea­son we will have seen that peo­ple are be­ing ex­tremely cau­tious in the way that they spent their money,” Chief Ex­ec­u­tive Mike Coupe told re­porters.

“There is def­i­nitely cau­tion out there and as we go through the next pe­riod of po­lit­i­cal and Brexit uncer­tainty I sus­pect that that will con­tinue to be re­flected in the way that cus­tomers be­have,” he said.

Coupe’s com­ments echoed those from No. 4 su­per­mar­ket chain Mor­risons, which said shop­pers had be­come more cau­tious amid uncer­tainty over whether Bri­tain will agree a ne­go­ti­ated with­drawal from the Euro­pean Union in less than three months’ time.

Sains­bury’s, which is bat­tling to ac­quire No. 3 player Asda, said that while gro­cery sales were solid in its third quar­ter, it suf­fered from shop­pers “down­trad­ing” to cheaper items. It also blamed poor de­mand at the Ar­gos gen­eral mer­chan­dise busi­ness it pur­chased in 2016.

Whether Bri­tain’s com­pe­ti­tion reg­u­la­tor ap­proves the Asda deal is the ma­jor swing fac­tor in Sains­bury’s share price. In the three months prior to Wed­nes­day’s up­date the stock had fallen 15 per cent on con­cerns the deal may not pro­ceed. They fell as much as 2.8 per cent, but re­cov­ered to be up 1.4 per cent af­ter Coupe re­it­er­ated his con­fi­dence that the reg­u­la­tor would clear the takeover.

An­a­lysts also noted that, despite miss­ing sales fore­casts, Sains­bury’s full-year profit guid­ance re­mained in­tact.

Sains­bury’s like-for-like sales, ex­clud­ing fuel, fell 1.1 per cent in the 15 weeks to Jan.5 - below an­a­lysts’ av­er­age fore­cast of a 0.2 per cent fall and a sec­ond quar­ter rise of 1.0 per cent.

The group said its to­tal re­tail sales fell 0.4 per cent in the quar­ter. That re­flected a 0.4 per cent rise in gro­cery sales which was more than off­set by a 2.3 per cent fall in gen­eral mer­chan­dise sales - a short­fall also blamed on a de­ci­sion to re­duce pro­mo­tional ac­tiv­ity across Black Fri­day in Novem­ber. It noted mar­gins “re­main un­der pres­sure” in gen­eral mer­chan­dise.

Mor­risons re­ported a 0.6 per cent rise in re­tail like-for-like sales for the nine weeks to Jan. 6, while in­dus­try data showed dis­coun­ters Aldi and Lidl won mar­ket share from all of the big four chains in the Christ­mas quar­ter.

Sains­bury’s 7.3 bil­lion pound deal to buy Asda, the UK arm of Wal­mart, is cur­rently be­ing as­sessed by the Com­pe­ti­tion and Mar­kets Author­ity (CMA), which has said it will pub­lish pro­vi­sional find­ings this month or early next.


Mike Coupe at an out­let of Sains­bury’s in Red­hill, Eng­land.

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