Sainsbury’s struggles through Christmas, says GlobalData

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Following today’s release of Sainsbury’s figures for Q3 FY2018/19, Thomas Brereton, retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Sainsbury’s launched its 2019 150th anniversary celebrations with a set of shoddy results this morning, continuing its struggles into the tail-end of 2018, with falling l-f-l sales and negative sales growth across general merchandise (-2.3%) and clothing (-0.2%) categories. And while food inflation continued to fall (sitting at 1.8% for the final three months of 2018), grocery sales growth at Sainsbury’s sat well below that at 0.4%. Misery will have been compounded following sound results from Morrisons yesterday, and may continue tomorrow with main rival Tesco predicted to release good results.

“It is difficult to point to the exact problems at Sainsbury’s. It continued product experimentation in the second half of 2018, introducing new vegan ranges and trialling a UK supermarket first with edible insects at 250 stores. And its new-format store in Birmingham Selly Oak, complete with a 180-seat food court, revamped health & beauty department and new concession partnerships (including a barbershop partnership with Timpson), shows that Sainsbury’s is trying its best to innovate and retain its customers. But despite these trials and the success story of the Argos integration (with Argos stores inside Sainsbury’s experiencing a 10% increase in l-f-l sales), the day-to-day business of Sainsbury’s is perhaps suffering the most from rapid changes in consumer habits as people flock to the discounters in search of cheaper prices.

“For the rest of 2019, Sainsbury’s will look to swiftly move past these poor results and focus on its upcoming CMA-approval-pending mega-merger with ASDA. Given the current pressure on the mid-to-premium market, CEO Mike Coupe is gambling that the CMA will approve it; if it refuses or requires too many disposals, the result will be Sainsbury’s drifting almost aimlessly during the year as competitors continue to grow.”

Richard Lim, chief executive, Retail Economics, said: “These results aren’t disastrous but demonstrate the significant challenges faced by the big grocers. Fiercer competition from the discounters, massive price investment from key competitors and shifting shopper behaviour have created a pressurised trading environment. Market share continues to slip away to the German discounters. 

“The decline in non-food reflects the wider slowdown in consumer confidence as cautiousness shown towards discretionary spending. Hard-fought sales in a heavily-discounted environment will put profitability under further pressure. 

“The industry is amid a painful readjustment. With such seismic changes afoot, the relationship between retailers, wholesalers and further down the supply chain could result in game-changing consolidation within the industry. The focus in 2019 will be on changing supply chain dynamics which could see further consolidation and collaboration as the drive for efficiency is necessitated by scale.”

Catherine Shuttleworth, CEO at Savvy, said: “A disappointing result for JS this morning – clearly a challenging Christmas period and sluggish activity on general merchandise sales has impacted the sales line leading to a -1.1 percent position. There’s lots for the business to focus on to get back on point including improving perception on in-store availability. However the real concern has to be general merchandise sales and lack of customer spending on discretionary items. We know that Xmas gifting was down 25 percent this year and JS has clearly been impacted by that.”