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Sainsbury sales better than feared

Sainsbury's posted its first sales decline over the key Christmas period for a decade today but the figures were not as bad as had been feared.

Like-for-like sales for the 14 weeks to January 3 fell by 1.7%, an improvement on the 2.8% dip seen in the second quarter and a better performance than analysts expected.

It was the fourth successive quarter of decline and the first time Sainsbury's has reported a fall over its third quarter, which includes the festive period, since 2005.

Chief executive Mike Coupe warned of a "challenging" outlook to come as food prices continue to fall in the supermarket price war - with the top four grocers squeezed by Aldi and Lidl.

Mr Coupe warned in November that supermarkets' like-for-like sales were expected to be negative for the next few years.

Signs that the store chain was starting to staunch the decline helped shares climb initially by as much as 4%, as well as providing a boost to fellow retailers Marks & Spencer and Tesco - due to report tomorrow - and Morrisons.

But the rally for Sainsbury's later fell flat amid fears that it would lose out if there should be a turnaround in the fortunes of larger rival Tesco under new boss Dave Lewis.

Sainsbury's said it enjoyed a record-breaking week before Christmas, with 29.5 million customer transactions.

Mr Coupe said: "Sainsbury's has provided a great Christmas for our customers. Food price deflation and falling fuel prices have enabled our customers to treat themselves over the festive period.

"The outlook for the remainder of the financial year is set to remain challenging, with food price deflation likely to continue."

It comes as Sainsbury's announces its latest reductions as part of a £150 million price-cutting plan announced in November. Meanwhile, Asda has just announced a £300 million price move, the latest part of a £1 billion five-year investment.

Mr Coupe said there had been an "improving trend" in quarter-on-quarter sales but said that, given the uncertainty in the trading environment and price cuts, the group expected fourth-quarter sales to be similar to the 2.1% decline posted in the first half.

He told Sky News that Sainsbury's had sold "the same amount of stuff we sold last year, but the prices were lower".

Sainsbury's high-end range, Taste the Difference, did well over the third quarter with growth of 5%, including prosecco sales up 30%. It also sold more than 57 million mince pies and more than 550,000 turkeys, up 8% year on year.

Sales rose 16% at its convenience store network, which saw its strongest single day's trading on Christmas Eve with takings of more than £8 million.

The group said online groceries saw their biggest Christmas to date with more than 110,000 orders delivered in the three days to December 23.

No overall quarterly online sales figure was given, leading analysts at Shore Capital to suggest it had not "shot the lights out".

Sainsbury's said clothing sales were up 10% as it doubled the number of Christmas jumpers purchased with a "snowman" design the best seller by volume.

The retailer opened 25 new convenience stores and four new supermarkets during the quarter while there was also a series of refurbishments.

Shore Capital's Clive Black said: "Whilst a little better than we expected, Sainsbury's third quarter sustains a period of difficult trading for the group."

He said Asda's latest price cut announcement looked "punchier" while Tesco and Morrisons might be in a "superior competitive position for the prevailing trading environment".

"Sainsbury's could be a vulnerable player in the middle, undercut by more price and cost-aggressive retailers beneath and losing share to the growing premium retailers in the form of Marks & Spencer and Waitrose above," Mr Black said.

Mike Dennis of Cantor Fitzgerald underscored the potential threat from market leader Tesco as Mr Lewis prepares to unveil its new strategy tomorrow.

He said: "The risk now is that we see further pressure on JS (J Sainsbury) sales as Tesco invests to recover some lost market share."

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