Like-for-like sales down 2.1% at Sainsbury’s
Sainsbury's feels the heat in the UK market "due to twin threats of falling or flat industry food volumes alongside the seemingly unstoppable growth of the hard discounters"
17 November 2014
Sainsbury’s underlying group sales were down 0.3% to £13,916 million, according to the UK grocer’s latest interim results for the 28 weeks to 27 September 2014. Retail sales (including VAT but not fuel) remained flat year-on-year, while like-for-like sales were down 2.1%. Underlying profit before tax was down 6.3% to £375 million.
In light of the results, the supermarket has pledged to improve the quality of 3,000 own-brand products. Sainsbury’s will also invest an additional £150 million in price, of which approximately half will fall in the second half of 2014/15 and the remainder in the first half of 2015/16, focused in areas where its customers say price matters most.
The supermarket plans to open 500,000 sq ft of space in each of the next two years, followed by 350,000 sq ft in 2017/2018. This will include eight new supermarkets over that period. It also includes four replacement stores, three of which are mixed-use developments, unlocking significant property profits. Over half of Sainsbury’s new space will be convenience stores as it continues to target opening 100 convenience stores per year.
A review of the supermarket’s estate found that around 75% of its stores are in the right locations and are of the right size for its food and non-food offer. It also showed that over the next five years, around 25% of its store portfolio will have some under-utilised space which can be used to expand the non-food offer or for other purposes such as carefully selected concession partnerships. Sainsbury’s will likewise continue to invest in groceries online to further improve its website and the customer experience, trialling new ways for customers to order and acquire their groceries, including click and collect.
David Tyler, Chairman said: “In order to execute this strategy, it is essential that we maintain the strength of our balance sheet. We will therefore be cutting our capital expenditure and making significant cost savings, as well as ensuring we pay an affordable dividend.”
David Gray, retail analyst at Planet Retail, commented: “The twin threats of falling or flat industry food volumes alongside the seemingly unstoppable growth of the hard discounters are now hitting the company performance hard. In light of sharp declines in like-for-like sales and profits, Sainsbury’s has taken drastic measures. In a case of ‘know thine enemy’, it has joined the discounters with the opening of a first Netto store in Leeds, in partnership with Danish operator Dansk Supermarked. Although allowing Sainsbury’s to tap into the UK’s fastest-growing bricks and mortar grocery channel, further investment beyond the £12.5 million already pledged will be needed at a time when cash is proving increasingly hard to come by.”