Sainsbury's cautious as festive sales turn cool

Sainsbury's chief executive Mike Coupe has warned of an 'uncertain' consumer outlook after unveiling a fall in sales at the supermarket major.

Sales dropped over the groups festive quarter. Picture: Michael Gillen

Sales dropped over the group’s festive quarter after general merchandise trading was hit by consumer caution and as it held back from heavy discounting.

Releasing its latest trading update, Sainsbury’s said like-for-like retail sales, including Argos and excluding fuel, dipped 1.1 per cent in the 15 weeks to 5 January.

Grocery sales nudged up 0.4 per cent in the 15-week period, but this was offset by a 2.3 per cent drop in general merchandise and a 0.2 per cent decline for clothing.

Coupe said Christmas “came late” as shoppers held off until the final few weeks.

The group, which is looking to push through a £12 billion mega-merger with Walmart-owned Asda, said general merchandise sales, including its Argos business, grew “strongly” over the key Christmas weeks, but this was not enough to boost the overall performance.

Coupe added: “Sales declined in the quarter due to cautious customer spending and our decision to reduce promotional activity across Black Friday.

“Clothing performed well, with strong full-price sales growth in a tough market. Retail markets are highly competitive and very promotional, and the consumer outlook continues to be uncertain.”

The sales slide was worse than expected by City analysts and comes in contrast to the 3.6 per cent rise reported by rival Morrisons a day earlier, covering the nine weeks to 6 January.

George Salmon, equity analyst at Hargreaves Lansdown, said: “Sainsbury’s results are disappointing. Like-for-like sales are stalling and the relentless rise of the discounters means Sainsbury’s market share is under pressure despite its best efforts to hold prices down.

“All the while, the general merchandise division, recently beefed up by the acquisition of Argos, is suffering the same pitfalls as other non-food retailers.

“While there’s little Christmas cheer in these numbers, Sainsbury’s investors could yet get a delayed present if the Competition and Markets Authority approves its proposed tie-up with Asda.”

Richard Hunter, head of markets at Interactive Investor, added: “The British aisles are still a source of difficulty for grocers generally and Sainsbury’s has provided an update which is less punchy than had been expected.

“The headline sales figures are not pretty.”