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Sainsbury's is at a loss as latest victim of price wars

By Jamie Stinson

Published 07/05/2015

The value of Sainsbury's property portfolio fell by £900m to £11.1bn, which it blamed on market rental values
The value of Sainsbury's property portfolio fell by £900m to £11.1bn, which it blamed on market rental values

Sainsbury's has followed arch-rival Tesco and become another victim of the supermarket price war after it posted its first full year loss in a decade.

The second biggest supermarket in Northern Ireland announced a profit of £681m, a fall of 14.7%, but once the fall in its property value is factored in it reported a loss of £72m.

The value of Sainsbury's property portfolio fell by £900m to £11.1bn, which it blamed on market rental values.

Sainsbury's also saw like-for-like sales fall by 1.9% due to challenging market conditions and food price deflation.

Over the last 12 months the price of groceries has fallen 3.2% year-on-year as the big supermarket chains compete with discount supermarkets such as Lidl.

Over recent years consumers have turned away from doing the big shop at large superstores and started to do top-up shopping at smaller, convenience-focused stores.

Sainsbury's has 13 stores in Northern Ireland, but has yet to open any of its smaller format stores despite having 707 throughout Britain and opening 98 in the last year.

Tesco has made its presence felt with its smaller format stores, opening 18 Expresses around Northern Ireland - in addition to its medium-sized Metro format store on Royal Avenue in Belfast.

Last month, the retailer said it would cut 800 jobs across the UK and could not say if jobs in Northern Ireland could face the axe.

The supermarket chain employs over 3,000 people here, and has seen its share of the Northern Ireland grocery market fall from 18% in March last year to 17.8% 12 months later.

Asda is snapping at Sainsbury's heels with 17.2%, but both are well behind market leader Tesco with 35.2%.

Discount supermarket Lidl is increasing its share as it expands, rising from 3.9% to 4.5% over the last year. Criona Collins, director, head of retail agency at Lambert Smith Hampton, said the grocery market has seen great change. "It's completely lifestyle-led; people now want to shop every day." Ms Collins added: "The discounters have driven this through their pricing mechanisms. Loyalty isn't important any more, with the market driven by convenience."

Richard Ramsey, Ulster Bank chief economist, said the market should continue to change over the coming years.

"The last number of years the agri-food has benefited from weakness of the pound and that has fed into the supply chain of large retail model.

"The retailers will change, but the extend of that has to be determined."

Sainsbury's chief executive Mike Coupe said supermarkets were facing a difficult time, with changing market conditions.

"The UK marketplace is changing faster than at any time in the past 30 years which has impacted our profits, like-for-like sales and market share.

"However, we are making good progress with our strategy, and our investment in price and quality is showing encouraging early signs of volume and transaction growth."

Mr Coupe said deflation in the grocery market is set to continue to the end of this year and potentially even later.

"We are selling more stuff. We are selling it to more people. The weight on the business is the fact that there is 2.5% deflation. We believe that is going to be with us certainly until Christmas and probably beyond that."

Belfast Telegraph

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