Food price deflation hits Sainsbury’s like-for-like sales at Christmas

Supermarkets to trump online shopping for groceries

Sainsbury’s: 29.5m transactions in run up to Christmas but sales down

Sainsbury’s has reported a fall in like-for-like sales over the key Christmas trading period.

The supermarket said same store sales fell 1.7%, excluding fuel, in the 14 weeks to 3 January 2014; impacted by food price deflation – the BRC-Nielsen Shop Price Index has reported deflation for every month in 2014.

Total sales, excluding fuel, fell by 0.4%.

Sainsbury’s said it had posted a good sales performance in a tough market, achieving over 29.5m customer transactions in the week before Christmas.

Mike Coupe, chief executive, said: “Sainsbury’s has provided a great Christmas for our customers. Food price deflation and falling fuel prices have enabled our customers to treat themselves over the festive period.”

Coupe said customers had traded up over Christmas with sales of its Taste the Difference range up 5% year-on-year.

The move to shop little and often was also increasingly apparent, he said.

“The trend of more frequent and local shopping continues and we saw growth of over 16% in our convenience business in the quarter. As well as over six million convenience customer transactions in the week before Christmas, we also saw our largest ever day for convenience sales on 24 December, taking over £8m.”

Online groceries did well too, enjoying a record Christmas to date.

During the quarter, Sainsbury’s opened 25 convenience stores and refurbished seven. It also opened four supermarkets, one extension and one replacement store, and refurbished seven supermarkets.

The supermarket said it is implementing 700 price cuts on key categories this week – in November it announced plans to invest £150m in the prices of some of the most popular products.

“The outlook for the remainder of the financial year is set to remain challenging, with food price deflation likely to continue,” said Coupe.

“Our performance in the third quarter showed an improving trend quarter-on-quarter. However, given the uncertainty in the trading environment, food price deflation and the price reductions we announced this week, we currently expect our fourth quarter like-for-like to be similar to that of our first half.

“Our prices versus our supermarket peers have never been better and alongside our differentiated quality and service offer, we are confident we will help our customers Live Well for Less throughout 2015.”

Bryan Roberts, director of retail insights, Kantar Retail, said Sainsbury’s results are likely to position the retailer as the second-best performer among the big four over the festive trading period.

“Sainsbury’s performance, against a deflationary zero growth backdrop, is by no means a horror show,” he said.

However, the retailer’s price cuts, while welcome, will do little to narrow the price differential with Asda – and the discounters, he said.

“2015 could be a challenge: lacking Tesco’s buying power and Asda’s efficiency, Sainsbury’s margins are set to be under further pressure. This might prompt some focus on costs, but we can only hope that any action in this regard focuses on back-end efficiencies rather than in-store.”

For David Gray, retail analyst at Planet Retail, Sainsbury’s looks behind the curve in terms of realigning its floorspace requirements, with larger rival Tesco having moved much earlier to combat hypermarket space issues.

Smaller stores are a highlight, however.

“Sainsbury’s is still one of the UK’s most successful convenience retailers with more than 600 outlets, a figure forecast to surpass 1,000 by 2018. Sainsbury’s is also taking swift action to address this new retail reality by tying up with Danish discounter Netto and working tirelessly on measures to reinvent its large stores. We can only hope these deliver results soon or the company may be facing a protracted slowdown,” he said.