Sainsbury’s hit by ‘shifting shopping habits’
Supermarket’s Q2 trading statement reveals sharp decline in both like-for-like and total sales
1 October 2014
UK grocery giant Sainsbury’s announced its Q2 trading statement today (1 October) which revealed total retail sales for the quarter were down 0.8% (excluding fuel), and down 2.3% (including fuel). Like-for-like retail sales for the second quarter were down 2.8% (excluding fuel), and down 4.1% (including fuel).
Mike Coupe, Sainsbury’s chief executive, said: “The market remains dynamic and fiercely competitive. The long-running trend of more frequent, convenient shopping has accelerated, resulting in smaller basket sizes. An increase in price investment and short-term competitor promotional activity, combined with favourable commodity markets, has resulted in deflation in many areas of our food business.”
Lowering base prices
He added that consumers had told Sainsbury’s they found supermarket pricing and promotions confusing and it had responded by “lowering base prices on thousands of lines” and “simplifying its Brand Match” proposition.
According to Coupe: “We are focused on serving our customers in the channel of their choice. Our convenience business reached annualised sales of £2 billion and continues to grow strongly, at around 17%. Groceries online grew by around 7%.
“During the quarter we opened 23 new convenience stores and refurbished 10 convenience stores. We opened two new supermarkets, three supermarket extensions and refurbished a further two supermarkets. We are on track to deliver five new Netto stores by the end of the year following our announcement on 20 June 2014. We will deliver around 750,000 square feet of new space this year, including around two new convenience stores per week.”
He added that Sainsbury’s expected its “like-for-like sales in the second half of the year to be similar to the first half”.
A watershed moment
Commenting on Sainsbury’s Q2 results, David Gray, retail analyst at Planet Retail, defined them as marking “a watershed moment for both Sainsbury’s and the wider UK grocery industry. The sharp decline in like-for-like and total sales at the retailer will send shockwaves across the market. First it was Tesco, then Morrisons, and now even Sainsbury’s Sainsbury’s is reeling from the effects of seismic structural changes rumbling across the UK food sector.
“The hard discounters are just one factor driving this change. Shifting shopper habits – consumers shopping little and often at convenience stores, smaller online baskets, households wasting less and evaporating hypermarket impulse spend – are all underpinning this shift. With volumes already dwindling and values expected to hit negative later this year in the face of ever-diminishing price inflation, the situation can only worsen. All this makes it increasingly likely Christmas will be a complete washout for the UK’s major grocers.”
He described Sainsbury’s performance as “slightly less diabolical” than Tesco’s but was nevertheless not an achievement “to shout about”.