SAINSBURY’S Q3 SALES DECLINE
Drop in demand for toys, electrical goods hits supermarket
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.