As expected, Sainsbury’s has reported a third straight quarter of declining underlying sales as the “tough trading environment” impacted demand for general merchandise and food.
Total group retail sales were down 1.2% over the 16 weeks to 29 June, with like-for-like sales slipping 1.6%. This compares to respective falls of 0.2% and 0.9% the previous quarter.
The retailer no longer breaks out like-for-like performance by division. Total grocery sales were down 0.5%, a slight improvement from the 0.6% decline the period before. However, its convenience and online operations continued to grow in the quarter, by 1.5% and 5.1% respectively.
Sainsbury’s stressed that it had improved its relative performance, helped by price reductions on over 1,000 everyday grocery products. It added that its ‘Taste the Difference’ ranges were growing market share and improvements had been made to product availability – a key area of weakness for the chain in recent times.
Meanwhile, following the trial of an enhanced beauty range, which was said to have resulted in double-digit beauty sales growth in trial stores, Sainsbury’s revealed that it now plans to roll out the offer to 100 supermarkets during this financial year.
Performance of its general merchandise and clothing operations was particularly disappointing, with the group saying that the difficult market conditions and recent poor weather had impacted demand in seasonal categories. Total general merchandise sales declined by 3.1%, whilst clothing sales slipped 4.5%.
The group opened two further Argos stores in Sainsbury’s supermarkets during the period, bringing the total to 283. It also upgraded 29 Argos stores to its newer digital format.
Chief Executive Mike Coupe, who is under pressure to reveal how he plans to boost the group’s performance following the failure of the Asda merger deal, commented: “We continue to adapt our business to changing shopping habits and made good progress in a challenging market.”
He recently outlined plans to accelerate investment in its core supermarket business and become more competitive on prices of staple foods to help the chain fight back against rivals. The group revealed today that it had refurbished 84 supermarkets in the first quarter and would finish improving 200 more by the end of the first half.
Since the Asda deal collapsed, Sainsbury’s shares are down almost a third and last week they touched their lowest level since 1986. The group today flagged further tough times ahead, warning that retail markets remained “highly competitive and promotional”, with the consumer outlook continuing to be uncertain.
Coupe is expected to face criticism from some investors at the company’s AGM tomorrow, with advice firm Pirc urging shareholders to vote against his “excessive” pay package, and oppose the election of new Chairman Martin Scicluna.
Commenting on the group’s recent performance, AJ Bell investment director Russ Mould said: “Now that a merger with Asda is no longer going to save the business, Sainsbury’s has to go it alone and find a way to survive and – most importantly – prosper.
“Unfortunately it’s hard to identify Sainsbury’s edge and how it will bounce back. There is still a sense that Sainsbury’s doesn’t really know what it wants to be.”
NAM Implications:
- Key issue for NAMs is the extent to which they under/over-performed vs these results.
- Given the current focus has to be financial results…
- …important for NAMs to be able to calculate cost and demonstrate value of their trade initiatives…
- …to Sainsbury’s latest available Balance Sheet and P&L.
- Longer term, NAMs have to ask whether the mults can return to pre Aldi, Lidl and Amazon glory days…
