Sainsbury’s has posted a 0.8% fall in like-for-like sales in the first quarter, with total retail sales up just 0.3%. The supermarket insisted it had made a “solid start” to the year, but analysts were more dubious.
Retail Remedy partner Phil Dorrell questioned whether Sainsbury’s had “taken its eye off the ball” amid the Argos takeover. “We have become unused to using the term decline in the same sentence as Sainsburys. In fact, there is a temptation to gloss over a fall in like-for-like sales as a short-term blip for long term security. This decline has come as Tesco is returning to growth. It is no coincidence and should not be glossed over,” he said.
The results showed that Sainsbury’s could not “escape the deeper malaise affecting the UK grocery sector”, said Retail Vision director John Ibbotson. “The shift to a medium-low pricing strategy has kept it in the game, but lacking the economies of scale enjoyed by the rest of the Big Four, Sainsbury’s is running out of road. Tesco, Asda and Morrisons have all put their houses in order and have taken the necessary action of cost cutting and fundamental business reorganisation. Some difficult decisions may lie ahead if Sainsbury’s is to remain competitive longer term.”
Shore Capital analyst Clive Black agreed the results highlighted underlying concerns. He branded the headline performance “marginally disappointing but far from a car crash”. “While this is so, beneath the surface there are concerns to our minds, particularly if we back solve the headline figure, taking into account a modest contribution from new space, deflation and Sainsbury’s robust performance in clothing, general merchandising, convenience and online. Indeed, taking these components into the round, Sainsbury’s grocery volume position in its superstores is likely to be marginally negative, in our view.”
But Richard Lim, chief executive of Retail Economics, said the performance was a sign that treading water was the “new norm” for the big four. He said the results were “in line with expectations” in light of the challenges facing the market, including food deflation, changing consumer habits and the threat of discounters.
Kantar Retail was even more positive, and said the “strong” performance could reverse the recent falloff in share prices. It praised its strategy to end price comparison scheme Brand Match, which was the “right decision”, and move to a more “shopper centric offer” with greater availability of general merchandise.
And analyst Arnaud Joly of Société Générale said the sales figures were “better than expected”. “Management unsurprisingly expects conditions in the UK to remain challenging,” he added.