Belfast Telegraph

Sainsbury's warned on price squeeze with sales falling

By Graeme Evans

Sainsbury's has reported a fifth successive quarter of falling sales and said it expects conditions to remain challenging for the "foreseeable future".

The UK's third biggest grocery chain, which has 597 supermarkets including 13 in Northern Ireland, posted a 1.9% decline in like-for-like sales for the 10 weeks to March 14, compared with a fall of 1.7% in the previous quarter.

The company is about to report the first drop in annual profits in a decade and chief executive Mike Coupe warned yesterday there were no immediate signs of a let-up in the price squeeze facing the sector.

He said: "Food deflation is likely to persist for the rest of this calendar year, and competitive pressures on price will continue."

Mr Coupe pointed out that sales volumes were growing across its food business and there had been an average uplift of more than 3% on the 1,100 products where the retailer has made price reductions.

Shares opened 2% higher yesterday as the latest sales figures were in line with City expectations.

Britain's big four grocers - Tesco, Morrisons and US-owned Asda are the other three - are engaged in fierce competition as they scramble for market share, which is being gnawed away by discounters Aldi and Lidl. Sainsbury's will report full-year profits in May for the first time under Mr Coupe since he succeeded Justin King, who stepped down last year following a successful decade in charge of the supermarket.

They are expected to show their first fall after nine years of growth, with City analysts expecting a 17% decline to £659m.

The retailer's convenience store business continues to expand with sales growth of 14% and the opening of 23 new sites in the quarter.

Online grocery orders increased by 14%, leading to a record week of 245,000 orders.

And by the end of this year, Sainsbury's said its online customers will be able to Click and Collect their groceries from 100 sites.

The performance comes with recent industry figures pointing to signs of a resurgence at Tesco under its new chief executive Dave Lewis.

George Scott, a senior consultant at retail analysis firm Conlumino, said: "Worryingly for Sainsbury's, Tesco's performance is showing of recovery, off the back of a more simplified pricing strategy as well as improved product availability, a consolidation of ranges and investment in in-store service levels.

"This will make Sainsbury's challenge to tip its market share slide even more difficult."

According to Kantar Worldpanel, the company's market share has fallen to 16.8%, behind Asda with 17% and Tesco at 28.7%.

 

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