Sainsbury moves to tackle ‘worrying’ sales dip
Forecasting a 3.5% like-for-like sales drop in Sainsbury’s forthcoming trading statement for its second financial quarter (Q2) Shore Capital analyst Darren Shirley partly blamed high pricing, which had helped discounters Aldi and Lidl.
All the ‘Big Four’ supermarkets had kept prices high as they sought to protect their profits, said Shirley. However, he pointed to Sainsbury’s new stress on low pricing, which it underlined in an announcement today (September 26).
Sainsbury stated: “Sainsbury’s is launching a new campaign across TV, print and in-store which explains a new approach to pricing for customers. This is the result of an 18 month commitment by the business to lower the regular prices of products across the grocery business.”
On its website, it added: “We’re rolling out lower prices on thousands of regular products.”
Sainsbury’s marketing director Sarah Warby said: “Customers tell us they find supermarket prices and promotions confusing and don’t always know who to trust when it comes to getting good value.
‘Good value all the time’
“So we’ve taken this feedback on board and we're making it easier for customers to buy the products they love, whenever they like, safe in the knowledge that they can get good value all the time on all products, without having to wait for promotions.
“We will continue to run as many promotions as before and they will be just as competitive, but customers now have the added reassurance that prices will always be great value at Sainsbury’s, both on and off promotion.”
Shirley’s note confirmed he had noticed this emphasis during a recent visit to a flagship Sainsbury store. “Indeed, in this respect we have visited the Sainsbury store in Hollywood, Belfast, earlier today, where we saw evidence of a step-up in pricing intensity, with a shift of emphasis away from promotional activity to ‘Everyday low Pricing’, particularly in proprietary brands.”
He also claimed continued deflation of food costs should ease the pressure on the top supermarkets to keep prices high. “Additionally, we see a very substantial northern hemisphere harvest, falling crude oil prices and so weaker commodity prices more or less across the board; recent updates from Greggs … reported easing cream, flour and pork prices.
“Accordingly, inflation, which has been a sustained feature of the British supermarket scene since 2006, is falling out of the system ...”
Commenting on Sainsbury’s recent performance, Shirley said: “After sustainably outperforming the market and the ‘Big Four’ peer group through the recession, Sainsbury has witnessed a material reverse in absolute and relative trading momentum in 2014.
‘Perplexing’
“We find the change in fortune to be perplexing and worrying for Sainsbury’s investors, with the group losing market share in recent months judging by Kantar data.”
Both Kantar and Nielsen data this week showed Sainsbury’s 12-week sales down 1.8%.
Shirley warned Sainsbury’s results also indicated it was losing out to the discounters in its core trading territory of the south and east of England, so its plans for Netto stores in the north would not address this.
However, he acknowledged Sainsbury’s strong performance in its second financial quarter last year had meant its current slump was even greater than it might have been. And he said generally poor summer trading across the industry, particularly in August, had not helped.
Meanwhile, Waitrose today reported sales excluding petrol up 6.4% for the eight weeks to September 20, from £112.3M in the same period last year to £120.8M, driven by warm weather and promotions. Sales in the eighth week of the period had grown at the highest rate for six months.
Bramley apples, barbecue food, ice cream, pre-packed fish and organic vegetables had all delivered strong growth, the retailer reported.
