Sainsbury's blames sales decline on 'cautious customers'

Wednesday 9th January 2019 09:30 GMT

The UK's second-largest supermarket chain, which has agreed to buy Asda for £15bn, said like-for-like retail sales, excluding fuel, fell 1.1% for the 15 weeks to 5 January.

Analysts polled by Reuters had been expecting 0.2% fall in sales.

While grocery sales rose 0.4% in the quarter, non-food trading - general merchandise sales and clothing sales - declined 2.3% and 0.2% respectively.

Mike Coupe, chief executive of Sainsbury's, said: "Sales declined in the quarter due to cautious customer spending and our decision to reduce promotional activity across Black Friday. Clothing performed well, with strong full price sales growth in a tough market.

"Retail markets are highly competitive and very promotional and the consumer outlook continues to be uncertain."

Rival Morrisons, Britain's fourth-biggest supermarket group, reported a sharp slowdown in sales growth at its stores over Christmas on Tuesday but it outperformed Sainsbury's with a 0.6% rise in like-for-like sales.

The country's biggest supermarket Tesco will reveal its trading over the crucial festive period on Thursday.

In contrast to the big four chains, discount rival Aldi said on Monday it had enjoyed its best ever festive period with sales of nearly £1bn in December and growth of 10% in the week before Christmas as it saw an "influx" of shoppers switching from rivals.

Aldi, together with fellow discounter Lidl, has shaken up the sector by eating away at the market share of the major players and prompting them to compete more fiercely on price.

Shares in Sainsbury's, which have fallen 15% over the last three months amid concerns the Asda deal may not go through, rose 0.5% to 267.6p in early trading.

Russ Mould, investment director at AJ Bell, said: "The big question now is what will happen to Sainsbury's if it doesn't merge with Asda. Sales momentum is poor and the business still seems to be having problems with empty shelves according to posts from its customers on social media."

He added: "Sainsbury's needs Asda to help it get out of trouble and give it the strength to fight off the competition from discounters Aldi and Lidl. Failure to secure a deal will leave it clearly exposed as the weakest player in the sector with no plan B with which to fight back."

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