Credit: David Holt/Flickr

Sainsbury's sales have slipped, but things could be much worse

The orange grocer is holding up OK. Will Christmas bring supermarket cheer?

by Jack Torrance
Last Updated: 15 Dec 2015

The middle ground in Britain’s grocery market isn’t an easy place to be at the moment. The old giants with massive chains of large stores face big challenges as customers turn to new discount supermarkets or more upmarket food shops like M&S. Many are foregoing their old weekly shop and buying food more frequently from convenience stores, which doesn’t help either.

Against that difficult backdrop, Sainsbury’s isn’t doing totally awful. Yes, revenues are down. Its interim results, out this morning, show group sales down 2% to £12.7m and retail sales down 2.1% on a like-for-like basis in the 28 weeks to September 26. Profitability was squeezed too – the chain’s underlying operating margin was down 39 basis points to 2.71.

But things really could be a lot worse. It posted a statutory profit of £339m million after a loss of £290m at the same time last year (although underlying profits were down 17.9%) and its convenience stores are doing particularly well, with sales up 11%. Its market share is down, but only ‘marginally’ by 17 basis points. Its shares were up by about 2% this morning to 277.9p. 

Given the rapid ascendancy of Aldi and Lidl, which are both growing in the double digits, Sainsbury’s looks to be holding up pretty well. That’s especially clear when you compare it to the likes of Morrisons, whose profits were down 47% in its half-yearly results, and Asda, which has been suffering from severe falls in sales, according to data from Kantar Worldpanel.

‘We are making good progress against the strategy we outlined last November,’ said chief exec Mike Coupe. ‘We are delivering volume and transaction growth as customers value our quality improvements and our clearer, simpler message of lower regular prices.’

Christmas is on the way soon and will be a big test of Coupe’s plans to turn things around. Last year's First World War-themed Christmas ad gave John Lewis a run for its money in the tugging-at-heartstrings stakes, so it will also be interesting to see whether it goes down a similar route for 2015. 

Things might not exactly be on the up, but given what we’ve come to expect from the ‘Big Four’ grocers of late, Sainsbury’s prospects don't look totally awful. 

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