Belfast Telegraph

Sainsbury's sales fall 0.5% amid 'competitive' trading and price pressures

Sainsbury's said trading remains "very competitive" and warned over ongoing price pressures from the weak pound as it saw supermarket sales slip back into reverse.

The group posted a 0.5% fall in like-for-like supermarket sales, excluding fuel, in its fourth quarter to March 11 , down from a rise of 0.1% in the previous three months.

Overall trading was boosted by a robust performance from its recently acquired Argos chain, which notched up a 4.3% rise in like-for-like sales over the nine weeks.

The Argos sales hike helped lift group-wide comparable sales into positive territory, up 0.3% in the fourth quarter.

Group chief executive Mike Coupe said he was "pleased" with the company's performance.

But he added: "The market remains very competitive and the impact of cost price pressures remains uncertain."

Sainsbury's blamed its fourth-quarter sales slip on the later Mother's Day and Easter this year, adding that, after adjusting for this, like-for-like sales would have been 0.1% higher.

It said the timing of Easter and Mother's Day particularly affected its general merchandise sales, which fell 4%.

This offset a 5% rise in sales of its Tu clothing range, while online groceries rose 7% and total convenience store sales were nearly 7% higher.

The chain's fourth-quarter sales fall left its annual comparable sales 0.6% lower after what has been an eventful year for the group.

It snapped up catalogue retailer Argos as part of a £1.4 billion takeover of Home Retail Group in 2016 and has since been overhauling its big supermarkets, adding 41 Argos Digital stores within these stores.

The group said 11 of these were opened in the fourth quarter alone, while it also now has eight Mini Habitat stores in its supermarkets.

Mr Coupe said customers were "responding well" to its new Argos ranges, with recent website and app improvements helping online sales grow.

The group said best-sellers over the quarter included mobile phones, video gaming, wearable technology and sports equipment.

But its supermarket business has struggled over the past year amid a lengthy price war in the sector, as well as pressure on costs and shelf prices from the Brexit-hit pound.

The fall in the value of sterling since last year's vote has seen the cost of imports rocket, with many businesses passing the costs on to consumers.

According to figures from Kantar, food inflation doubled last month to 1.4% year on year as the cost of everyday staples such as butter and tea rose.

Sainsbury's shares fell as much as 3% after the update, but later settled around 1% lower, with rivals Tesco and Morrisons also slipping into the red.

Mr Coupe admitted that Sainsbury's had passed on some of the rising costs from the weak pound to customers, but insisted the group was working hard with suppliers to keep prices down.

He said: "We are beginning to see inflation in the marketplace - some is being passed down, but we're doing everything we can to mitigate cost pressures."

The group said that after deflation of 0.5% in the third quarter, it ended the financial year with rising prices for the first time in two-and-a-half years, although it declined to reveal the level of inflation.

But Mr Coupe said consumer spending suggested they were yet to start feeling the pinch.

"Consumer spending is where it has been - consumer incomes are still growing and there's money out there for consumers to spend," he said.

He added that the integration and growth of Argos was "slightly ahead" of where they expected, with the 10 concessions opened in supermarkets for more than a year still seeing like-for-like sales growth of 25%.

Retail experts at Shore Capital said the Argos performance was "highly encouraging".

And while rising prices may be bad news for consumers, they said this would be "broadly virtuous" for supermarkets after a lengthy price war.