10th Jun 2015 10:02
LONDON (Alliance News) - J Sainsbury PLC Wednesday reported a drop in retail sales and a sixth consecutive quarter of declining like-for-like sales in the first quarter of its financial year, as it continues to be hit by food-price deflation amid a highly competitive UK grocery market.
The supermarket chain admitted that it is difficult to establish when sales will return to growth although its chief executive said he is encouraged by the "early trends" it is seeing.
Sainsbury's said that total retail sales in the 12 weeks to June 6 were down 0.6% excluding fuel, or 2.3% including fuel on the same period the year before, while like-for-like retail revenue was down 2.1% excluding fuel, or 3.7% including fuel, the sixth consecutive quarter of like-for-like declines.
However, the 2.1% like-for-like fall excluding fuel was slightly ahead of the 2.2% consensus estimate, according to Brewin Dolphin.
The big four UK supermarket said that the pressures of food-price deflation, as well as its own targeted price investment have continued to hit like-for-like sales.
In November, Chief Executive Mike Coupe revealed his strategy to invest GBP150 million a year in price cuts for the next three years, resulting in price reductions in over 1,100 products, as the big four supermarkets battle it out in a price war to win over customers in the wake of the success in the UK of German discounters Aldi and Lidl.
On Monday, rival Wm Morrisons Supermarkets PLC announced price reductions to a further 200 items, but since Coupe's price strategy commenced, he has maintained confidence that Sainsbury's will outperform its peers in the sector, saying that its "prices have never been sharper".
?We will continue to always match our competitors and we?re in the process of reviewing whatever price cuts go on in the marketplace,? Coupe told journalists on Wednesday.
Brewin Dolphin analyst Nicla Di Palma agrees that Sainsbury's is placed ahead of its peers. "The announcement by Morrisons that it will cut prices further is a marginal negative, but we continue to believe that Sainsbury's is the best placed amongst the three listed supermarkets," Di Palma said.
Sainsbury's Coupe added that he is "encouraged by some of the early trends that we are seeing in our key trading and operational metrics", as volume and transactions grow ahead of expectations.
?We?re actually slightly ahead of where we expected to be at this point,? he said, although he did acknowledge that until there are signs that inflation might return to the marketplace, it is difficult to establish when like-for-like sales will return to growth.
Sainsbury's added that its Travel Money division grew strongly in the quarter, at over 40% year-on-year, while clothing delivered sales growth of over 5%. Groceries online also had a record week in the quarter with 256,000 orders, while the convenience store business remains in double-digit growth, it said.
"Despite the challenging market conditions, we are confident that we are building on strong foundations and making good progress with our strategy. We continue to invest in our broad range of products and services and our multiple channels to market. These areas represent strong future growth opportunities and contribute towards our resilience in the current trading environment," Coupe said in a statement.
Despite the negative sales performance, Sainsbury's is the best performer in the FTSE 100 Wednesday morning, trading up 4.6% at 262.10 pence.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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