18th Mar 2014 10:11
LONDON (Alliance News) - British supermarket chain J Sainsbury PLC Tuesday reported its first sales fall in nine years for the fourth quarter of its financial year, but Chief Executive Justin King said the grocer will not get caught up in the price war within the supermarket sector at the moment, and will ensure competitive prices in its own way.
The UK's third largest grocer reported a 1.5% drop in sales in the fourth quarter, and a steep decline of 3.8% in like-for-likes sales.
The downbeat fourth-quarter trading update was in stark contrast to stable sales growth in previous quarters, and a strong Christmas trading period. The grocer said it expects the outlook for customers to continue to be challenging for the coming year, but in the long term is confident it can outperform its competitors.
So far Sainsbury's has been more reluctant that its peers to review its investment approach, with supermarket rivals Tesco PLC, Asda and Wm Morrison Supermarkets PLC all having announced big investment plans recently, including price cuts worth hundreds of millions of pounds, to combat market share loss and pressure from low-cost discounters such as Aldi and Lidl.
But Justin King said the group will continue to invest in price cuts its own way, via its less expensive own-brand range and its brand-match promise.
"The pricing pencil is being sharpened. We have already matched our prices for milk, bread and eggs, and we will match prices when we feel necessary," said King in a call with journalists, adding: "We will ensure our prices will remain competitive, and ensure competitive prices in our own way, with our own-brand products and brand match."
In its Christmas trading update, Sainsbury's cut its sales guidance for the current financial year, warning that although it had seen customers splurge in the run-up to Christmas, October and November had been very slow, and the current quarter was also looking tough as consumers reign in spending after a splurge at Christmas. It said at the time, that it expected like-for-like sales growth for the year to dip below 1%, down from its previous sales guidance of between 1% and 1.5%.
In a trading statement for the fourth quarter Tuesday, the grocer reported a much bigger drop of 1.5% in total sales for the 10 weeks to March 15, with sales down 1.0% excluding fuel.
On a like-for-like basis, sales fell by 3.8%, and were down 3.1% excluding fuel.
King said sales declined due to a tougher market, and against tough comparatives, when last year its benefited by being one of the only UK supermarkets not involved in the horse meat scandal. King also said that the market has been significantly softer since Christmas.
"We have seen a decline in sales in the quarter reflecting tough comparatives," King said. "This time last year our sales benefited significantly from the discovery of horsemeat in some branded and competitors' product. We are pleased, however, that market data shows we have maintained market share at 17%."
King said the later timing of Easter and Mother's Day, which fall in quarter one of its new financial year, and unseasonable weather, also have contributed to lower market growth year-on-year, but said that for the full financial year the group will see like-for-like growth of 0.2%.
Sainsbury's driving forces and growth areas remain online and convenience stores. It said its convenience store business grew by 15% in the quarter, and during the quarter saw one million transactions in a day. The retailer said its saw slower growth in its online grocery business during the quarter, up only 6%, due to reduced marketing, as it is in the middle of launching a new customer website. It said the roll-out is now 80% complete and is due to finish next month.
The company's general merchandise and clothing business also continue to perform well, with particularly strong growth in menswear of over 23% year-on-year.
In its half year report in November, the retailer said that its general merchandise arm was growing at twice the rate of its food business.
"Our general merchandise business is still growing, whereas our food business isn't right now," said King.
Sainsbury's said it opened approximately one million square feet of new space over the year, including 22 convenience stores during the quarter. This brings a total for the year of 13 new supermarkets, 91 convenience stores and 6 extensions. It also refurbished a further 54 stores.
During the quarter Sainsbury's acquired the remaining shares of Sainsbury's Bank from Lloyds Banking Group PLC, and now fully owns the bank, with the transition process on track as planned, it said.
The supermarket recently said that King will step down in July after 10 years at the helm, and will succeeded by Mike Coupe, currently the group's commercial director.
J Sainsbury shares were trading 0.2% down Tuesday morning at 310.67 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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