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Retail: Nine-year run of sales growth at Sainsbury’s comes to an end

08:54 18 March 2014

Justin King, chief executive of, Sainsbury

Justin King, chief executive of, Sainsbury's

Archant

Supermarket Sainsbury’s today warned that the market is growing at its slowest pace for nearly a decade as it broke a nine-year run of underlying sales growth.

The group revealed that like-for-like sales excluding fuel slumped 3.1% in the 10 weeks to March 15, marking a sharp reversal of recent fortunes and the first fall after 36 consecutive quarters of rising sales in a row.

Outgoing boss Justin King said the group came up against tough comparatives from a year earlier when it outperformed many rivals amid the horsemeat scandal and benefited from the timing of Mother’s Day and Easter trade.

But he stressed that the market was facing tough conditions in the latest downbeat trading statement from one of the “big four” players as cost-conscious consumers increasingly turn to discounters such as Aldi and Lidl.

He said: “The market is now growing at its slowest rate since 2005, with falling food inflation in particular benefiting customers.”

He added: “Although some economic indicators are showing an improvement in the health of the economy, we expect the outlook for customers to continue to be challenging for the coming year.”

The group’s fourth-quarter sales decline was steeper with fuel included, falling by 3.8%.

Experts at Shore Capital Stockbrokers slashed full-year profit forecasts for Sainsbury’s as they said the sales slide was slightly worse than already-downbeat expectations.

But Sainsbury’s appeared to resist being drawn into the price war waged by its three main rivals to take on the might of the discount chains.

Morrisons last week followed the lead of Tesco and Asda, pledging to invest £1billion over three years after it tumbled to a £176million annual pre-tax loss and warned over results for the year ahead.

The dismal figures from Morrisons sparked a shares rout among listed supermarkets amid worries over a full-blown price war.

All four of the major players have reported sliding sales in recent months, while the likes of Aldi and Lidl have benefited from a switch to cheaper alternatives.

But despite the fourth-quarter sales plunge, Sainsbury’s said it had continued to outperform its main rivals and bucked the trend for falling market share, held at 17% in the 12 weeks to March 2, according to recent Kantar Worldpanel data.

Instead of unveiling a swingeing price-cutting campaign, Sainsbury’s highlighted the “value for money” of its popular own-brand ranges, claiming they were already 20% cheaper than branded equivalents and now make up more than half of all sales, at 51%.

It also put faith in its growing clothing ranges, boosted by a collaboration with designer Gok Wan, convenience store business and online delivery offering.

The group saw a million transactions in one day across its 91 convenience stores for the first time during its fourth quarter and said growth remained strong at 15%, while online grocery trade rose by 6%

Shore Capital’s retail analysts said the sales results will be a “particular disappointment” for Mr King, who steps down after 10 years at the group’s annual meeting in July, when he will hand over to commercial director Mike Coupe.

They said: “We will be interested to see how Sainsbury’s approaches the greater discount challenge. Whilst it is not losing out to the same extent as its peers, we do not believe that Sainsbury’s is blind to the challenge.”

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