Sainsbury’s booked its first drop in like-for-like sales in nine years this morning (18 March), when the UK retailer revealed fourth-quarter comparable revenues fell 3.8%.
Excluding fuel, like-for-like sales were down 3.1% in the period to 15 March and total sales dipped 1% year-on-year.
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Commenting on the news, CEO Justin King said the decline reflected “tough comparatives”, with sales in the year-ago period lifted by the horsemeat scandal. He added the UK grocery sector is growing at its slowest rate since 2005, with falling food inflation impacting total value sales.
Sainsbury’s is also witnessing a shift in its sales mix, as the sales growth of its own label products outpace branded products. Own- label lines are, on average, 20% cheaper than a branded equivalent, King said.
King, who is preparing to step down as Sainsbury’s chief executive this summer, emphasised the retailer’s “values” – which look at issues surrounding ethical sourcing. “Customers continue to tell us they recognise the uniqueness and value for money of our own-brand ranges,” he insisted.
While Sainsbury’s recently moved to lower the price of milk, bread and eggs, the retailer resisted joining the price war that is breaking out between its peers.
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By GlobalDataResponding to pressure from the discount sector – notably Aldi and Lidl – Tesco and Asda have both stepped up their price investment in recent months. Last week, Morrisons said it will invest GBP300m in price cuts this year.
George Scott, food and grocery analyst at Conlumino, said Sainsbury’s sales decline strengthened the argument that “the prominence of the discounters is part of a structural shift in grocery”.
However, he added: “Although avoiding a commitment to pricing will likely undermine further short-term competitiveness, the Sainsbury’s brand is well placed for more sustained market traction, as consumer spending begins to pick to up.”
Shares in Sainsbury’s were up 0.19% at 312p at 10:22 GMT.
Click here for a round-up of what analysts thought of Sainsbury’s trading update.
