8th Jun 2016 08:15
LONDON (Alliance News) - J Sainsbury PLC said it made a solid start to its current financial year on Wednesday, reporting transaction growth across channels, even as it remains cautious on the outlook in a competitive grocery sector.
The FTSE 100-listed grocer said like-for-like retail sales in the 12 weeks to June 4 fell 0.8% excluding fuel and were down 1.0% including fuel. Total retail sales were up 0.3% excluding fuel and down 0.1% including fuel in the quarter.
The decline in like-for-like sales marked a reversal of a good run for Sainsbury's. In its last financial year to March 12, the retailer reported a continual improvement in like-for-like sales declines over the course of the year, culminating in 0.1% growth in the fourth quarter.
Sainsbury's convenience stores performed well, with sales up 6.0%, and seven new stores opened in the quarter. Online grocery sales grew in the quarter, up 8.0% with a 13% rise in orders, and the group launched the Sainsbury's groceries mobile app in the quarter in order to drive further sales through this channel.
The company also reported like-for-like transaction growth across its sales channels in the quarter, which Chief Executive Mike Coupe said marked a "solid start" to the new financial year. The transaction growth came as Sainsbury's removed its Brand Match scheme, which compared prices on branded products with rival supermarket Asda Stores Ltd, owned by US giant Wal-Mart Stores Inc.
In place of that, the company lowered the prices on a wide range of products in a push to offer regular low prices. In the same vein, promotional activity reduced further in the quarter and Sainsbury's said promotions were tracking at around 23% of total products, compared to 30% a year earlier.
The group added the vast majority of multi-buys will be phased out by August.
Multi-buys were cited by Kantar Worldpanel as a reason for the sales decline it reported for Sainsbury's in its latest grocery market figures, covering the 12 weeks to May 22. Sainsbury's sales fell 1.2% in that period - which is slightly different from the one reported by Sainsbury on Wednesday - following a run of positive sales performances for the group, Kantar said.
Kantar Director Edward Garner said this was due to a decline in multi-buy sales, as Sainsbury's shifts its promotional emphasis from multi-buys to straightforward price cuts.
The push to offer everyday lower prices has been in evidence across the UK grocery sector as the big four supermarkets - Sainsbury's, Asda, Tesco PLC and Wm Morrison Supermarkets PLC - attempt to fend off the challenge from insurgent German discounters Aldi and Lidl.
"Sainsbury's is well-positioned. Our core food business offers customers choice, quality and a clear value proposition. General merchandise and clothing continue to perform well with good sales growth across both businesses, and we continue to see encouraging results from Sainsbury's Bank, a significant opportunity for long-term growth," Coupe said.
But the chief executive said market conditions remain challenging in the UK grocery sector, with food price deflation hitting sales and pricing pressures, meaning the market will remain competitive "for the foreseeable future". Kantar had reported food price deflation for the 12 weeks to May 22 was 1.5%, while total UK supermarket sales rose 0.1%.
"However, we are confident that our strategy to be a trusted multi-channel, multi-product and services retailer is delivering and will enable us to continue to outperform our major peers," Coupe added.
Sainsbury's shares were up 0.1% to 247.00 pence on Wednesday morning.
By Sam Unsted; [email protected]; @SamUAtAlliance
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