After facing controversy over its Christmas TV advert , it has emerged that the situation at Sainsbury’s has gone from bad to worse over the festive trading period.
The supermarket brand has suffered its first fall in Christmas sales in more than a decade, indicating that consumers are continuing to spend at discount stores even during the traditionally most profitable time of year for the Big Four.
During the 14 week period to the 3rd of January, like for like sales excluding fuel fell by 1.7 per cent, while total sales dropped by 0.4 per cent. When fuel sales are taken into account, total sales plunged by 2.5 per cent which, although certainly not positive, is a much better result than was initially forecast by City analysts.
In response, chief executive Mike Coupe has announced a raft of cost cuts for the year ahead expected to lower the price of around 1,000 items in a £150 million investment. However, Kantar Retail analyst Bryan Roberts believes that this strategy may not be enough to win back disillusioned customers.
He says; “Sainsbury’s performance, against a deflationary zero growth backdrop, is by no means a horror show and is likely to position Sainsbury’s as the second best performer among the Big Four over the festive trading period.
“This week’s price cuts, although welcome, seemingly do little to narrow the price differential with Asda – and the discounters – and are arguably not far reaching enough given how far the retailer has allowed its own brand prices to drift from competitors.”
While sales of own brand and mainstream products may have suffered, it seems that Sainsbury’s made gains in other areas and thus slightly redeemed the poor trading season somewhat.
Its top end Taste the Difference range, for example, experienced a sales lift of 5 per cent, with an 8 per cent rise in the number of turkeys sold when compared to last year and 57 million mince pies being snapped up by shoppers.
Sainsbury’s Local stores also enjoyed a relatively buoyant sales period, indicating that changing consumer shopping habits played a significant role in the supermarket brand’s wider fortunes. The convenience network saw its busiest ever day on Christmas Eve, with takings clearing £8 million, while sales rose by 16 per cent during the period as a whole.
Unfortunately, Mr Coupe seems less than confident that the situation for the Big Four will improve this year, as he claims analysts would be “very brave” to predict an uptick in grocery spending by consumers. Furthermore, he predicted that the brand’s sales performance will worsen during the next quarter, perhaps comparably to the first half performance of this financial year.
He says; “The outlook for the remainder of the financial year is set to remain challenging, with food price deflation likely to continue.
“It is undoubtedly the case that they [consumers] have more in their pocket, but are choosing to spend it on other things.”
Do you think the price drops will turn the situation around for Sainsbury’s, or is Mr Coupe right to be cautious about the next quarter’s outlook?
