Sainsbury’s sees continued struggles as sales fall

The grocer is set to report profit loss for first time in a decade. Picture: Toby Williams
The grocer is set to report profit loss for first time in a decade. Picture: Toby Williams
Share this article
0
Have your say

SAINSBURY’S has reported its fifth consecutive quarter of falling sales and said it expects trading conditions in the grocery sector to remain challenging “for the foreseeable future”.

The grocer, which has been expanding its estate of convenience stores, is forecast to report its first drop in annual profits for a decade as it cuts prices in response to pressure from discount rivals Aldi and Lidl.

Food deflation is likely to persist for the rest of this year

Mike Coupe, chief executive

Chief executive Mike Coupe warned yesterday that there were no immediate signs of a let-up in the price squeeze facing the sector, which has also hit fellow “big four” chains Tesco, Asda and Morrisons.

“We expect the market to remain challenging for the foreseeable future,” Coupe said.

“Food deflation is likely to persist for the rest of this calendar year, and competitive pressures on price will continue.”

Like-for-like sales at Sainsbury’s, which has 597 supermarkets, fell 1.9 per cent in the ten weeks to 14 March.

This was a steeper decline than the 1.7 per cent reported for the previous quarter.

The UK’s third-largest grocery chain opened 23 convenience stores during the quarter, taking its total number of small-format outlets to 707.

Smaller rival Morrisons, a late entrant to the convenience sector, has 153 M Local branches and last week said it would be closing 23 in the coming year while slowing the pace of openings “significantly”.

Nicla Di Palma, retail analyst at Brewin Dolphin said: “We believe Sainsbury’s is better placed than competitors to weather the difficult conditions in the food retail sector. Nonetheless, it is obviously facing the same issues and we see profitability coming down significantly both this year and next.”

In May, Coupe will announce the first set of full-year figures for Sainsbury’s since he succeeded previous boss Justin King, who stepped down in July following a successful decade in charge of the supermarket.

The results are expected to show the first fall in profits after nine years of growth, with City analysts predicting a 17 per cent decline to £659 million.

Yesterday’s trading update came a week after industry figures from researcher Kantar Worldpanel showed sales at Sainsbury’s dipped 0.5 per cent in the 12 weeks to 1 March, but troubled market leader Tesco enjoyed its strongest performance in 18 months with sales up 1.1 per cent on a year earlier.

In comparison, takings at Aldi surged 19.3 per cent, while Lidl’s sales grew 13.6 per cent.

In a bid to fight off the challenge from the German duo, Sainsbury’s announced in November that it would be ploughing £150m into price cuts, and Coupe said: “We have seen volume growth across the food business and an average uplift of over 3 per cent on the 1,100 products where we have made price reductions.”

SUBSCRIBE TO THE SCOTSMAN’S BUSINESS BRIEFING

Get the latest business headlines from a variety of news sources emailed to your inbox each morning