Credit: Ell Brown

Sainsbury's is down but not out

The supermarket chain's sales dipped 1.9%, but it's getting more customers through the doors.

by Jack Torrance
Last Updated: 27 Aug 2015

It must be a nightmare for today's supermarket chiefs, expected as they are to navigate their way through a period of such woe. All of the 'Big Four' have suffered over the last year as customers have demanded lower prices and competitors at both the discount and posh end of the spectrum have threatened to muscle in on their turf. It doesn't look like any of them have come up with a magic bullet yet, even if Tesco has bucked the trend for now.

Today brings mixed news for Sainsbury’s boss Mike Coupe, who’s been struggling to fill the ginormous shoes left for him by Justin King. In the 10 weeks to March 14, like-for-like sales excluding fuel were down 1.9% - not fantastic but slightly better than the 2.1% City analysts were expecting. That makes this Sainsburys’ fifth quarter of decline – proving that it’s not just a blip.

In more positive news, Coupe said volume sales were up across the whole business, with an average increase in volume sales of 3% on the 1,100 products which have had their prices cut.

‘As silver linings go, it's not a bad one,’ said Phil Dorrell, director of retail consultancy Retail Remedy. ‘The value of sales is down, but volume is up as Sainsbury's aggressive discounting has lured more people through the door. Those price cuts - on more than 1,100 products - are hurting the bottom line in the short term, but in the long term might just stop the rot.’

The supermarket does need to be careful that it maintains a reasonable level of quality though – it’s generally been perceived as being the most upmarket of the big four, an important differentiator in a competitive market.

Sainsbury’s is keen to demonstrate the price war hasn’t damaged its wares  – touting ‘improvements to our fresh salmon and Taste the Difference crisp ranges’ as examples of its focus on making sure its food is still up to scratch. But some would argue that the value of brand and quality has been made redundant by consumers’ hungry appetite for lower prices.

‘Without better prices, Sainsbury's is not going to catch the resurgent Tesco,’ said John Ibbotson, director of consultants Retail Vision. ‘In today’s supermarket world, price will always trump quality, range and store standards. Brand is no longer something brands can rely on to bail them out.’

It’s clear where the real future growth potential lies. Sainsburys’ convenience stores and online sales performed well – both were up 14% - and it’s continuing to roll out click and collect to more stores too. But with food deflation looking likely to continue, Coupe will need to work his traditional stores hard if he wants to turn things around.

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