Sainsbury’s remains under pressure

Sainsbury's CEO Mike Coupe.
Sainsbury's CEO Mike Coupe.
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Sainsbury’s has posted a second consecutive quarterly fall in sales as it remains under pressure amid the bitter supermarket war and food price deflation.

Britain’s second biggest supermarket, which recently completed a £1.4bn takeover of Argos, reported a 1.1 per cent drop in like-for-like sales excluding fuel for the second quarter.

Mike Coupe, chief executive of Sainsbury’s, said: “We continue to make progress against our strategy and, while like-for-like sales were down 1.1 per cent, driven by food price deflation, we delivered like-for-like transaction growth across all channels and total volume growth.”

Sainsbury’s added that Argos notched up like-for-like sales growth of 2.3 per cent during the period, with Mr Coupe saying the group will open 200 new digital collection points by the end of the year. Thirty Argos digital outlets will be open in Sainsbury’s stores by Christmas.

The grocer is slugging it out with rivals in a brutal price war which has eroded margins at all of the so-called big four supermarkets.

Sainsbury’s pledged to “remain competitive”, adding that it has made further investments in the prices of everyday items such as broccoli, onions and its frozen deep pan Margherita pizza.

“We expect the market to remain competitive and the effect of the devaluation of sterling remains unclear. However, Sainsbury’s is well positioned to navigate the changing marketplace and we are confident that our strategy will enable us to continue to outperform our major peers,” Mr Coupe said.

With profits squeezed by the growth of German discounters Aldi and Lidl Britain’s “big four” supermarkets - market leader Tesco, Sainsbury’s, Asda and Morrisons - are all fighting back with price cuts and service improvements.

Sainsbury’s has both lowered and simplified its prices, reducing the number of promotions and removing most “multi-buy” deals.

Phil Dorrell, partner at retail consultants Retail Remedy, said: “Sainsbury’s is facing a resurgent Tesco and Morrisons. In the next 12 months Asda will also start to regain its footing, and Aldi are in fighting talk, standing by their pledge to be the lowest priced grocer. Quite simply, Sainsburys footfall is falling short.”

Sainsbury’s also issued a trading update on Argos, following its takeover of the business earlier this year.

In its second quarter to August 27, Argos achieved total sales growth of 3 per cent and like-for-like sales growth of 2.3 per cent.

Mr Dorrell said: “Argos has been a distraction, of course a £1.4bn purchase will be distracting, and the pressure to ensure that it delivers a return will be immense. However, at what cost to the core business?”