A shaft of autumnal sunshine from among the embattled Big Four in the supermarket sector. And little surprise the rays have come from Sainsbury’s, which independent data from Kantar recently showed to be the only one of the big boys to hold its market share in the three months to 13 September as Tesco, Asda and Morrisons all suffered falls due to the depredations of the discounters.
Sainsbury’s revealed yesterday that same-floorspace second-quarter sales fell 1.1 per cent, an improvement on the 2.1 per cent fall in the previous three months, and that it now expects full-year profits to be moderately ahead of City expectations.
Taken aback by the “recovery”, shares in Sainsbury’s saw double-digit gains. It is getting like that in the food retailing sector these days. Even a slowdown in overall decline is grasped at hungrily by investors, starved of good news in recent years.
To put it in perspective, though, Sainsbury’s has still delivered its seventh consecutive quarter of falling sales. And, despite the continued growth of convenience stores and online, the group, like its major peers, still has to contend with food deflation, changing consumer trends and endemic price promotions in the sector that are squeezing profit margins.
The majors are responding to that margin pressure by cost reduction, either through closing stores, abandoning planned openings, or shaking the central overheads tree to see what can be dislodged.
Sainsbury’s has been no slouch in that, but its arch rivals are not hanging around, either. And, although the company has announced price cuts on 1,100 items, it is still generally perceived as being less price-competitive than the other big three.
However, to do better than you did before even if the sales decline is continuing, is still a starting point. It will be quite some time under new Sainsbury’s chief executive Mike Coupe before we come anywhere near the halcyon days of his predecessor Justin King (whose exit from the sector may have been fortuitous, but also looks more inspired with each passing quarter).
But Coupe at least seems to have stopped the rot. My hunch is the winners among the Big Four will be the one or two that stabilise quickest on the like-for-like sales front.
Resilience and holding the line are unspectacular attributes, but they are probably the ones that a pressured sector with lowered sights will aspire to for the foreseeable future.