Sales growth at Sainsbury’s slowed sharply in its first quarter after it faced tough comparatives with the same period last year when shoppers were stockpiling groceries during the first lockdown. However, its performance was ahead of expectations and demand was still strong as people continued to consume more food and drink at home.
Including both the Sainsbury’s and Argos chains, the group’s like-for-like sales (excl. fuel) rose only 1.6% in the 16 weeks to 26 June compared to a rise of 11.3% in the previous quarter. However, the figure was better than analyst’s forecast of a 1.7% fall. This prompted Sainsbury’s to raise its annual underlying profit guidance from £620m to “at least £660m”, up from £356m last year when the business faced significant costs related to operating during the pandemic.
The group’s total grocery sales edged up 0.8%, although growth was 11.3% when compared to two years ago before the Covid-19 crisis. Sainsbury’s highlighted the success of its new ‘Food First’ strategy, which has included improving its competitiveness via its Aldi Price Match and Price Lock initiatives. The chain is also increasing the speed of product innovation, with it on track to launch 1,900 lines this year, including 277 new lines in the quarter.
“We continue to make good progress against our plan to put food back at the heart of Sainsbury’s and have good momentum within the business,” said Simon Roberts, Chief Executive.
Whilst consumers are beginning to return to more normal shopping patterns and visiting stores again, Sainsbury’s highlighted that online remained popular with year-on-year growth still elevated at 29%. The channel accounted for 18% of its grocery sales during the quarter against 8% in the same period last year.
The group also revealed its ‘On Demand’ grocery sales had surpassed expectations with its 60-minute delivery service Chop Chop now available in 49 stores and Uber Eats and Deliveroo in 230 stores.
Sainsbury’s convenience store business continued to recover as the easing of lockdown restrictions led to shoppers returning to city centres. Total sales were said to be up year-on-year, driven by a recovery in its urban c-stores and Food on the Move outlets.
Meanwhile, within the group’s Argos division, total sales slipped 3.7% against tough comparatives with Spring last year when many of its competitors were closed during the first lockdown and good weather brought forward seasonal sales. Meanwhile, Sainsbury’s General Merchandise activities performed well, with 11.2% sales growth driven by gifting, events and homeware.
Shares in Sainsbury’s are up over 20% so far this year, buoyed by bid speculation. That started in April when Daniel Kretinsky, the Czech billionaire whose retail investments include France’s Casino and Germany’s Metro, raised his stake to just under 10%. This has been fuelled over the last couple of weeks by the bid battle for rival Morrisons and analyst’s talk that UK grocers are ripe for acquisition given their relatively low valuations.
Roberts today refused to be drawn on whether the group could become part of the takeover activity gripping the sector, saying his focus was on delivering his strategy.
“I’m not going to speculate on where things are in the wider sector,” Roberts told reporters in reference to three suitors pursuing Morrisons.
“We’re very focused on our plan. We laid out a plan in November to really deliver improvements for our customers and improve the value that we can create for our shareholders.
“We’re only seven months into that, but I hope you can see in the results that we’ve announced today some good early momentum.”
Asked directly if the Sainsbury’s board had received any approaches, Roberts said: “If we had anything to update on, we’d be updating on it, so we’ve nothing to update you on.”
NAM Implications:
- Sales growth slowing, yet up on 2019.
- But is it fast enough to remain independent?
- Bound to be a distraction for management…
- Especially with Asda under new ownership, Morrisons under takeover-scrutiny.
- Best for suppliers to anticipate takeover, by harmonising any major Prices & Terms at disparities, at least…
