Sainsbury’s has reported declining underlying sales for its fifth consecutive quarter as the grocery market feels the heat from the discounters, new shopping patterns (convenience stores and online), aggressive price-cutting and broader deflation.
Britain’s third largest supermarket group said this morning that like-for-like sales fell by 1.9% across stores that had open over a year, excluding fuel, in the 10 weeks to March 14.
The performance did beat analysts’ expectations however, and even Sainsbury’s own. Its convenience business grew sales by 14%, order numbers jumped by 14% online and sales of the Big Four grocer’s general merchandise and clothing increased 6% in comparison to the same period last year.
In response to “challenging” market conditions as Mike Coupe, Chief Executive, labelled them, Sainsbury’s cut the prices of 1,100 products. Sales of these products have grown by 3% on average in terms of volume, but see Sainsbury’s generating less in revenues.
Coupe, who succeeds Justin King as CEO, doubts the market will improve this year, said “the decisions we have taken to improve our competitiveness are reflected in our quarterly performance.
Since we announced our strategic review in November we have lowered the regular prices of over 1,100 products, ensuring our price position relative to our major competitors has never been stronger. In addition, we have absorbed record levels of food deflation in categories where we trade most strongly – produce, dairy, fresh ready meals, meat, fish and poultry.
We expect the market to remain challenging for the foreseeable future. Food deflation is likely to persist for the rest of this calendar year, and competitive pressures on price will continue. However, we believe that the great value and quality of our products, combined with a strong focus on developing our multi-channel offer, will enable us to outperform our supermarket peers.”
Under King’s leadership, Sainsbury’s had recorded 36 quarters of like-for-like growth. Now the UK grocer is falling behind Tesco.
“With Tesco slowly dusting itself off under Dave Lewis, and its market share almost twice that of Sainsbury’s, it holds all the cards in the price game, with bigger margins to give back to its customers,” comments John Ibbotson, Director at retail consultancy, Retail Vision.
“Without better prices, Sainsbury’s is not going to catch the resurgent Tesco” he adds.