“Challenging” Trading Conditions And Move Away From Multi-Buy Promotions Impacts Sales At Sainsbury’s

Sainsbury’s warned today that trading conditions would remain “challenging” after it reported a fall in its first quarter sales.

During the 12 weeks to 4 June, the group’s like-for-like sales (excl. fuel) slipped 0.8% with total sales edging up 0.3%. The underlying figure was slightly better than analyst’s expectations but was a step back from the 0.1% rise reported in the fourth quarter of its last financial year (its first quarterly growth for more than two years), with analysts blaming Sainsbury’s decision to move away from multi-buy promotions to focus on offering shoppers lower and simpler pricing. Sainsbury’s also recently ditched its brand-match guarantee as part of the change in its promotion strategy.

The group revealed that promotional participation levels reduced further in the quarter and are now tracking at 23% (down from over 30% this time last year). It added that the vast majority of multi-buys will be phased out by August.

The strategy was aimed at combating the rise of the discounters with Chief Executive Mike Coupe insisting the move was not denting trade, pointing to strong like-for-like transaction growth across all channels and volume uplifts. He said: “Our prices have never been more competitive than they are at the moment. Discounting is part of the cut and thrust of the job we do, it’s business as usual, but our price position is getting better.”

With the price war continuing to rage and rivals Tesco and Morrisons showing signs of improvement, Coupe said that market conditions would remain “challenging”. He added: “Food price deflation continues to impact our sales and pressures on pricing mean the market will remain competitive for the foreseeable future. However, we are confident that our strategy to be a trusted multi-channel, multi-product and services retailer is delivering and will enable us to continue to outperform our major peers.”

Sainsbury’s non-food operations continued to outperform its core grocery business with clothing sales rising nearly 5% in the quarter while general merchandise sales increased by over 5%.

The supermarket’s fast-growing convenience business achieved growth of over 6% with the opening of seven new convenience stores during the period. Its online grocery unit also performed well with sales up over 8% and nearly a 13% increase in orders.

NAM Implications:
  • Whatever the cause, it’s the result that counts
  • Give it time for the price positioning to work
  • But watch Asda…