Sains­bury’s rev­enues dip as shop­pers show cau­tion

An­a­lysts be­lieve gro­cer’s sea­sonal per­for­mance will be the worst of all the ma­jor su­per­mar­ket chains

The Daily Telegraph - Business - - Business - By Ash­ley Arm­strong

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.

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