Sainsbury's Gloucester

Sainsbury’s announced a positive set of results this morning as it revised its profit forecast upwards despite continuing tough trading conditions.

David Gray, an analyst with Planet Retail, commented:

“Once again, Sainsbury’s has posted a subdued set of like-for-like numbers – though improving and markedly better than some arch-rivals, notably Asda. The simple fact is the retailer is reeling from the effects of industry-wide falling food prices and stagnant overall food volumes – which, combined, are proving a drag on sales.

“Sainsbury’s remains one of the best among a bad bunch – Asda and Morrisons being way behind on like-for-like performance. It also has some key attributes that will stand it in good stead going forward – a sizeable and growing convenience business, fewer very large hypermarkets than its rivals and a still-effective loyalty scheme in Nectar.

“It is also working tirelessly to adapt its big-box formats to a new retail reality through moves like the Argos shop-in-shops and investing in refurbishments to enhance the instore experience – all of which, we feel, will leave it better positioned when the present unfavourable headwinds have passed.”

“A like-for-like fall of 1.1% during the second quarter is a respectable and improving performance from Sainsbury’s, in a market characterised by food price deflation and minimal volume growth,” said Alastair Lockhart, Insight Director at retail marketing agency Savvy.

”The retailer’s convenience and online growth strategy helped increase total sales – if only just (+0.3% exc. Fuel). In a very tough market Sainsbury’s finds itself in a position of relative strength with a growth agenda, good store standards, a clearer point of difference than it’s big four rivals and a quality story.

”That said, Savvy’s research shows that 57% of Sainsbury’s shoppers use discounters already, and that proportion is only likely to increase as the likes of Aldi and Lidl ramp up their store openings in the south of England.”

John Ibbotson, director of the retail consultants Retail Vision, said:

“Declining like-for-likes in the UK supermarket industry is almost the new norm for the Big Four.

“Expect this broader trend to continue for a number of years yet, until Aldi and Lidl run out of sites, especially in the south of England Sainsbury’s heartland.

“My bet is that a much leaner Sainsbury’s will be around in 2020, unlike some of its competitors. These marginally better than expected numbers are proof of its ability to resist.

“In fairness to Mike Coupe, Sainsbury’s has made the right decision in cutting the dividend, store openings and capital outlay, and this will all help if the money is ploughed back into prices.