Sainsbury's takes a hit from general merchandise slowdown

Big four supermarket Sainsbury's has said sales dropped over its festive quarter after general merchandise trading was hit by consumer caution and as it held off from heavy discounting.

Sainsbury's saw like-for-like retail sales fall 1.1 per cent. Pic: PA

The supermarket giant, which is planning to snap up Leeds-based rival Asda in a £12bn deal, saw like-for-like retail sales, including Argos and excluding fuel, fall 1.1 per cent in the 15 weeks to January 5.

Grocery sales rose 0.4 per cent in the 15 weeks to January 5, but this was offset by a 2.3 per cent drop in general merchandise and a 0.2 per cent decline for clothing.

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Mike Coupe, chief executive of Sainsbury’s, said Christmas “came late” as shoppers held off until the final weeks, while he warned over an “uncertain” consumer outlook.

The group said general merchandise sales, including its Argos business, grew “strongly” over the key Christmas weeks, but this was not enough to boost the overall performance.

Mr Coupe added: “Sales declined in the quarter due to cautious customer spending and our decision to reduce promotional activity across Black Friday.

“Clothing performed well, with strong full-price sales growth in a tough market.

“Retail markets are highly competitive and very promotional, and the consumer outlook continues to be uncertain.”

The sales fall is worse than expected and comes in contrast to the 3.6 per cent rise reported by Bradford-based rival Morrisons on Tuesday for the nine weeks to January 6.

It also marks a change in fortunes after Sainsbury’s enjoyed a 1 per cent sales rise in the previous quarter and saw festive sales lift 1.1 per cent a year ago.

Industry data on Tuesday pointed to a tough Christmas for Sainsbury’s, with Kantar Worldpanel saying the chain was the worst performer of the Big Four with its market share dropping to 16.2 per cent over the 12 weeks to December 31, down from 16.5 per cent a year earlier.

Kantar’s data also showed that two thirds of households shopped at either Aldi or Lidl over the Christmas period, giving the discounters their highest ever combined market share of 12.8 per cent.

In its update, Sainsbury’s said food price inflation fell back to its lowest level for two years over the quarter.

It also said Argos outperformed a “weak” market and added that its Fast Track service had proved popular, with sales up 8 per cent.

Across its supermarkets, online sales rose 6 per cent and convenience stores saw 3% growth in the quarter.