Supermarket giants set to reveal sales squeeze

TWO of Britain’s supermarket heavyweights are expected to reveal further pressure on sales this week as discounters such as Aldi and Lidl continue to seize market share.

Morrisons has adopted a price-slashing policy to attract shoppers. Picture: Getty

Morrisons, which has 60 stores in Scotland, shocked the market with a £176 million annual loss in March, when chief executive Dalton Philips hit back by unveiling a £1 billion price-slashing programme over three years.

The group reports first-quarter trading on Thursday, and analysts say early indicators of how consumers have reacted to his initiative will overshadow the headline numbers.

Philips is expected to admit like-for-like sales have continued to slide – down between 4 to 6 per cent, following a 5.7 per cent fall in the previous quarter.

Rahul Sharma, a food retail analyst with Neev Capital, said: “We have not heard that there has been much impact from the Morrisons move. It is early days, but we would have expected a bit more noise on that front by now.”

Analysts will want to know how much of the roughly £300m of price cuts Philips has pledged for this financial year will have kicked in already. The City fears that the step-change in price promotions to fend off the discounters will cut the profits of all the food retailing majors.

Dave McCarthy, HSBC’s head of retail research, said: “This [Morrisons] is the biggest move so far by a retailer in the developing price war. It is likely to lead to retaliation from some competitors.

“In turn the domino effect could then lead the whole sector into cutting prices more than the £1bn pledged [by the main players] this year.”

Sainsbury’s, which reports its annual results on Wednesday, saw its share of the grocery market fall to 16.5 per cent from 16.9 per cent a year earlier in the most recent spring figures released by Kantar. Morrisons saw its share drop to 11.1 per cent from 11.6 per cent. By contrast, Aldi’s share jumped to 4.6 per cent from 3.4 per cent, while Lidl moved to 3.4 per cent from 2.9 per cent.

Sharma said: “Sainsbury’s has been the most sanguine about the discounters, I think because it is more in the south east of England.”

The City consensus is that Sainsbury’s profits will have risen nearly 4 per cent to about £782m.

Sainsbury’s, which has some 50 Scottish stores, posted a 3.1 per cent fall in like-for-like sales in its final quarter – its first in nearly ten years.