Sainsbury’s has reported a 3.8 per cent decline in like-for-like sales for the fourth quarter in 2013 as competitive pressure from Aldi, Lidl and Waitrose told.
It is the first l-f-l decline at Sainsbury’s in nine years.
The grocer – which trails Tesco and Asda in the UK – achieved a modest sales rise of 1.4 per cent in the first half in 2013 but lost its record of l-f-l sales growth for 36 straight quarters which fell 1.5 per cent (ex fuel). L-f-l sales were flat for the year.
Sales growth (ex fuel) fell 1 per cent in the fourth quarter but rose 2.7 per cent for the year.
The results, which were below analyst’s expectations, will be a disappointment for outgoing chief executive Justin King and a concern for his replacement Mike Coupe.
In a call to investors this morning, King rejected Morrisons idea that the grocery market is in extraordinary change and said “the early 90’s were tougher.”
“We are delivering declining sales in what has been a tough market but we have continued to outperform our peers,” he said. “Growing the top line” by serving customers is the main thing.”
Investment banking firm Shore Capital said it was cutting its forecast and recommendation on Sainsbury’s shares but added that it believed the group has a differentiated offer that provides “a little more resilience to industry pricing from Asda, Tesco and Morrisons.”
Analyst Clive Black added: “We will be interested to see how Sainsbury’s approaches the greater discount challenge. Whilst it is not losing out to the same extent as its peers, we do not believe that Sainsbury’s is blind to the challenge.
“Additionally, we continue to see an opportunity for Sainsbury to bolster its free cash flow generation, so perhaps covering its dividend more effectively by cash, through a further cut in capital expenditure.”
Despite the drop in sales, the grocer maintained its UK market share of 17 per cent.