Sainsbury’s revenues dip as shoppers show caution
Analysts believe grocer’s seasonal performance will be the worst of all the major supermarket chains
CHRISTMAS came late for Sainsbury’s as the grocer recorded a drop in sales after “cautious” customers reined in their spending and its Argos business came under pressure from deep discounts offered by rivals.
The supermarket, which plans to merge with “Big Four” rival Asda, recorded a 1.1pc fall in like-for-like sales for the 15 weeks to Jan 5, which analysts believe will be the worst performance of the major grocers. Total sales dipped by 0.4pc.
Mike Coupe, the Sainsbury’s chief executive, said that “consumers have become extremely cautious about what they spend their money on”.
Grocery sales grew by 0.4pc overall as a fall in sales at its larger stores were offset by a 3pc rise across its convenience stores, which enjoyed a record Christmas Eve as shoppers dashed for last-minute and forgotten essentials. Online orders recorded a 6pc rise.
Sainsbury’s biggest weakness came from its general merchandise division, which suffered a 2.3pc drop in sales, raising fresh questions about its takeover of Argos, which had previously helped drive sales over Christmas.
The supermarket blamed the sales slump on its decision to reduce the level of promotions over Black Friday when rival electrical retailers were offering huge discounts.
Shares in the FTSE 100 company ended 2.3pc higher at 272.6p.
Mr Coupe said that there were “a lot of retailers in distress so there has been a lot of discounting and we are a business set up to make money”. He added that Black Friday had got “a bit carried away with itself in past years so we have been very careful how we managed it”.
Sainsbury’s said that its margins remained under pressure in the general merchandise market. “The decline in non-food reflects the wider slowdown in consumer confidence as cautiousness is shown towards discretionary spending,” said Richard Lim at Retail Economics. “Hard-fought sales in a heavily discounted environment will put profitability under further pressure.”
The Sainsbury’s boss said there had been a “general downtrading” trend with shoppers switching to Sainsbury’s cheaper own-brand products, which meant that its premium “Taste the Difference” range had not enjoyed the same levels of growth as previously. He added that the average selling price was lower than expected.
Mr Coupe’s comments about the shift in consumer behaviour follows Morrisons’ chief executive Dave Potts saying that shoppers were “pulling their horns in”, and discounter Aldi toasting record Christmas sales.
Industry commentators have raised questions about whether Sainsbury’s
‘Hard-fought sales in a heavily discounted environment will put profitability under pressure’
has been distracted by its pending merger with Asda as the reason for poorer shop standards over the summer and weak sales figures.
But Sainsbury’s Mr Coupe said he “utterly refuted” the idea that the business was not focused on day-to-day operations and said only 20 people were working on the deal compared to a workforce of thousands.
Sainsbury’s said that it was still confident in winning approval from the deal from the competition watchdog.
“Given the current pressure on the mid-to-premium market, chief executive Mike Coupe is gambling that the CMA will approve it; if it refuses or requires too many disposals, the result will be Sainsbury’s drifting almost aimlessly during the year as competitors continue to grow,” said Thomas Brereton, analyst at GlobalData.