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Sainsbury's sales continue to suffer in supermarket price war

Published 28/09/2016

Sainsbury's reported a 1.1% drop in like-for-like sales excluding fuel for the second quarter
Sainsbury's reported a 1.1% drop in like-for-like sales excluding fuel for the second quarter

Sainsbury's has posted a second consecutive quarterly fall in sales as it remains under pressure amid the bitter supermarket war and food price deflation.

Britain's second biggest supermarket, which recently completed a £1.4 billion takeover of Argos, reported a 1.1% drop in like-for-like sales excluding fuel for the second quarter.

Boss Mike Coupe said: "We continue to make progress against our strategy and, while like-for-like sales were down 1.1%, driven by food price deflation, we delivered like-for-like transaction growth across all channels and total volume growth."

Sainsbury's added that Argos notched up like-for-like sales growth of 2.3% during the period, with Mr Coupe saying the group will open 200 new digital collection points by the end of the year. Thirty Argos digital outlets will be open in Sainsbury's stores by Christmas.

The grocer is slugging it out with rivals in a brutal price war which has eroded margins at all of the so-called big four supermarkets.

On Wednesday, Sainsbury's pledged to "remain competitive", adding that it has made further investments in the prices of everyday items such as broccoli, onions and its frozen deep pan Margherita pizza.

"We expect the market to remain competitive and the effect of the devaluation of sterling remains unclear. However, Sainsbury's is well positioned to navigate the changing marketplace and we are confident that our strategy will enable us to continue to outperform our major peers," Mr Coupe said.

Julie Palmer, partner and retail expert at Begbies Traynor, said the supermarket is lagging behind its rivals.

"Yet again, Sainsbury's has failed to turn around its weak sales performance, in stark contrast to the recent momentum seen by two of its largest competitors, Morrisons and Tesco, whose recovery seems to be gathering pace.

"It remains too early to tell what material benefits Sainsbury's will garner from the integration of Argos. However, current sales figures look promising.

"Over the next six months, investors will be keeping a close eye on the supermarket chain to see if the £1.4 billion deal can deliver the significant cost savings and diversified shopping experience that Sainsbury's hopes it will."

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