Sainsbury's sales fall amid '˜challenging' trading

SUPERMARKET major Sainsbury's rattled its sabres yesterday as the group warned that it was ready for any escalation in the price wars in Britain's food retailing sector after reporting a fall in sales.

Sainsbury's is feeling the pressure of the supermarket price war. Picture: Phil Wilkinson/TSPL

Sainsbury’s chief executive Mike Coupe made his comments as the company posted a 0.8 per cent drop in like-for-like sales in the 12 weeks to 4 June.

They also came after Wal-Mart, the American owner of the Asda chain, said last week that it would shift the strategy of its British business from safeguarding profits to protecting market share.

Analysts interpreted this as indicating a new price offensive was in the pipeline. But the Sainsbury boss countered yesterday: “For the last God knows how many years there’s been lots of noise from Asda and indeed lots of noise from everybody else.

“If things change, we’ll deal with that but we’ll maintain our price position.”

He said Sainsbury’s, which like the rest of the Big Four is fighting the onslaught of discounter chains Lidl and Aldi, had stuck to a strategy of lowering its regular prices and cutting back on multi-buy promotions.

However, the group’s sales fall marks a setback after a return to quarterly like-for-like growth in the previous three months for the first time in more than two years, when sales edged 0.1 per cent higher.

Analysts at broker Jefferies said: “While investors continue to worry about the possibility of an Asda backlash, Sainsbury’s appears to be paying the heavier price of Tesco taking back customers.”

Coupe, who succeeded Justin King as chief executive two years ago, signalled caution. “Market conditions remain challenging,” he said.

“Food price deflation continues to impact our sales and pressures on pricing mean the market will remain competitive for the foreseeable future.”

He admitted the decline in first-quarter sales was a “slight step back”, but said the chain would stick to its strategy and continue to lower everyday prices.

Sainsbury’s has slashed prices on staple items such as whole chickens, free range eggs and cheddar cheese in response to customer feedback. It now has about 23 per cent of goods on promotion, down from more than 30 per cent a year ago.

Coupe gave hope of an easing in the food price deflation that has been hitting the sector hard, saying it is now running at around minus 1 per cent against falls of up to 2.5 per cent last year – but it is likely to persist until the autumn.

The first quarter update comes as Sainsbury’s £1.4 billion takeover of Argos‑owner Home Retail Group faces scrutiny from the competition watchdog.

The Competition and Markets Authority (CMA) said last month it was looking into whether the tie-up could result in a “substantial lessening of competition”.

It will consider comments on the deal and decide whether to launch an inquiry by 25 July.