Following on from yesterday’s disappointing trading figures from Morrisons and a downbeat assessment of the sector by Kantar, Sainsbury’s has revealed that its sales fell over the Christmas period as cautious consumers reined in their spending on general merchandise goods.
The group’s total retail sales, covering the Sainsbury’s and Argos chains, declined by 0.7% over the 15 weeks to 4 January, with like-for-like sales also down 0.7%. That compares with like-for-like fall of 0.2% in the previous quarter.
The group no longer provides a like-for-like breakdown by division but said that total grocery sales grew 0.4%, slightly ahead of analysts’ expectations. Sainsbury’s highlighted the success of its ‘Price Lockdown’ events and new entry price point ‘owned brand’ lines which have replaced its Basics range. The chain now offers 160 products across 15 new tertiary brands, with it claiming it was the only traditional retailer to show growth in value own label sales over the period.
Sainsbury’s revealed that volumes of its premium Taste the Difference range increased over the quarter, whilst Christmas Party Food performed well. It also launched the new ‘Plant Pioneer’ brand during the period, adding 31 new products to its range of over 200 meat alternatives.
Meanwhile, sales of general merchandise goods were down 3.9% in a “challenging” market. The group said its Argos business had its biggest digital Black Friday to date and it had outperformed the sector in consumer electronics. However, sales of toy and gaming products weakened.
Following the failed bid to merge with Asda and a prolonged period of lacklustre performance, Sainsbury’s has been working on improving its stores, product offering and competitiveness. The group today highlighted further progress in these areas with Chief Executive Mike Coupe commenting: “We gave our customers a great combination of quality food at good prices this Christmas and we delivered a standout performance operationally.
“We have a real sense of momentum in Sainsbury’s and investment in our stores and improvements to service and availability have led to our highest customer satisfaction scores of the year.”
Looking ahead, the group warned that retail markets remained highly competitive and promotional with the consumer outlook continuing to be uncertain. “However, we are well placed to navigate the external environment and are executing well against our strategy,” Sainsbury’s said. Coupe also told the BBC that he was comfortable with analysts’ average forecasts for full year profit.
Commenting on the trading update, Richard Lim, CEO of Retail Economics said: “These results show a mixed picture for the retailer. On the one hand, the food business held up relatively well in an extremely tough market. Competition was intense and the sense is that they held their own.
“On the other, Argos appears to have had a much tougher time delivering an uncomfortable decline in sales over the festive period. Although online sales during Black Friday may have been the biggest to date, consumers are likely to have pulled forward spending at the expense of Christmas trading.”
He added: “Despite the huge investment in the digital integration of the two businesses, these results show the there is still a long way to go. Against the backdrop of rising operating costs and a highly promotional environment, margins are likely to have been eroded even further over the period.”
NAM Implications:
- For suppliers, the issue remains one of investment of resource vs reward, compared with other customers.
- Given the growth rates of alternative routes to consumer, compared with Sainsbury’s…
- …a rebalancing of trade strategies is becoming necessary.
- i.e. vital the Aldi, Lidl and Amazon/online be factored into your resource allocation…
- …or suffer business dilution by continuing ‘as is’…
