DCSIMG

Comment: Sainsbury’s slides | MPC overhaul

Picture: David Parry

Picture: David Parry

  • by MARTIN FLANAGAN
 

It had to end some day. Sainsbury’s record nine years of unbroken quarterly sales growth ended in the ten weeks to 15 March. The City, always anticipatory rather than backward-looking, is more interested in whether this is a watershed marking a greater period of sales volatility for Sainsbury’s or a one-off jolt before normal service is resumed.

Outgoing chief executive Justin King, who has presided over the astonishing record, was not biting, however. He refused to second-guess whether sales uncertainty will dog Sainsbury’s in future as it has its major rivals Tesco, Morrisons and Asda.

It did not stop King alluding to the special factors affecting the latest quarter’s 3.1 per cent slide in like-for-like sales, including Easter and Mother’s Day falling outside the period, and unhelpfully wet and warm weather.

In addition, Sainsbury’s was up against tough comparatives with the same quarter last year, when rivals suffered from the horsemeat scandal (and Sainsbury’s was given a clean bill of health).

But it remains as likely that we are seeing a paradigm shift in expectations for both Sainsbury’s future performance and that of the food retailing industry in general.

The competition from the smaller discount players like Lidl and Aldi has been part of the supermarket landscape for several years.

But there has been a step-change in the intensity of the competition from that quarter in the past couple of years or so. That changing dynamic looks irreversible.

Meanwhile, Tesco has launched strong price-discounting in an attempt by the market leader to regain ground lost in recent years, while an increasingly desperate Dalton Philips at Morrisons has also declared a price-cutting war to try and reverse the group’s spiralling fortunes. Dog-eat-dog could break out imminently.

Clearly, Sainsbury’s knockback has coincided with King’s forthcoming departure, not been caused by it. I believe his legacy is strong enough for Sainsbury’s and new boss Mike Coupe to weather the rising competition better than most in the sector, but be far from immune to it.

Online and convenience stores are the new battleground, and Sainsbury’s and Tesco are in pole position here compared to Asda and Morrisons.

But purely big-store shops for consumers are increasingly only one part of a more fragmented and less transparent food retailing industry.

It would be unsurprising if we see more sales setbacks from Sainsbury’s and the rest of the sector, perhaps leavened with quarters where players tread water or unveil marginal growth.

Carney stamps mark with MPC revamp

After forward guidance to the outside world, comes high level internal restructuring at the Bank of England. governor Mark Carney’s signature is on the changing of the culture of the Bank.

International Monetary Fund official Nemat Shafik becomes the first woman to have a top policy role at the central bank since 2010, as its new deputy governor for markets and banking.

Ben Broadbent, up until now an external member of the monetary policy committee, steps up to become deputy governor for monetary policy.

And Andy Haldane, the BoE’s executive director for financial stability, is swapping jobs with chief economist Spencer Dale, who will lose his MPC seat from the start of June. It remains to be seen whether cumulatively the changes been a more dovish or hawkish tone to the MPC’s interest rate deliberations.

 

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