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Sainsbury's warns over 'uncertain' impact of pound's Brexit slide Sainsbury's warns over 'uncertain' impact of pound's Brexit slide
(about 1 hour later)
Sainsbury’s has warned that the impact of cost pressures from the post-Brexit vote fall in the pound remains uncertain as it reported a slight fall in sales at its supermarkets. Sainsbury’s has warned that the impact of cost pressures from the post-Brexit vote decline in the pound remains uncertain as it reported a slight fall in sales at its supermarkets.
The UK’s supermarket chains are dealing with higher import costs and some commodity price rises following the fall in the pound agains the dollar and the euro since the June referendum. The UK’s supermarket chains are facing higher import costs following the fall in the pound against the dollar and the euro since the June referendum, as well as some commodity price rises.
The group posted a 0.5% fall in like-for-like supermarket sales, excluding fuel, in the three months to 11 March, down from a rise of 0.1% in the previous quarter. According to consultancy Kantar, food inflation doubled last month to 1.4% year on year as the cost of everyday staples such as butter and tea rose, suggesting household budgets will come under more pressure this year.
However, 4.3% like-for-like sales growth at Argos, bought by Sainsbury’s last year in a £1.4bn deal, helped offset the decline in supermarkets. Combined Sainsbury’s and Argos sales excluding fuel, at stores open at least a year, were up by 0.3%. Sainsbury’s posted a 0.5% fall in like-for-like supermarket sales, excluding fuel, in the three months to 11 March, down from a rise of 0.1% in the previous quarter.
Sainsbury’s share price fell by nearly 2% in early trading after it reported the quarterly results on Thursday. However, 4.3% like-for-like sales growth at the catalogue retailer Argos, bought by Sainsbury’s last year in a £1.4bn deal, helped offset the decline in supermarkets. Combined Sainsbury’s and Argos sales excluding fuel, at stores open at least a year, were up by 0.3%.
“The market remains very competitive and the impact of cost price pressures remains uncertain,” said Mike Coupe, Sainsbury’s chief executive. “However, we are well placed to navigate the external environment and remain focused on delivering our strategy.” Sainsbury’s share price fell by nearly 2% in early trading after it reported the quarterly figures on Thursday, before recovering.
The group blamed the dip on the later timing of Easter and Mother’s Day this year, saying supermarket sales would have been up 0.1% otherwise – matching the 0.1% rise reported over the Christmas period, Sainsbury’s first sales growth since March 2016. The timing depressed sales of household goods, gifts and other general merchandise, down by 4%. “The market remains very competitive and the impact of cost price pressures remains uncertain,” said Mike Coupe, Sainsbury’s chief executive. “We entered the quarter with deflation and exited the quarter with inflation in the business.”
The company plans to put 250 Argos outlets into Sainsbury’s stores over the next three years, up from 41 at present. Argos enjoyed strong sales of mobile phones, video games, wearable tech and sports equipment. He insisted that Sainsbury’s had done a “remarkable job” riding out the storm since the Brexit vote. “There are cost price pressures in the supply chain but we have done a good job of mitigating them ... to minimise the impact on consumers.”
Coupe described the group’s food performance as solid and said its Tu clothing brand had again beaten the market, with sales up 5%. Sainsbury’s has extended its pre-prepared vegetable range with products such as butternut squash waffles and sweet potato tagliatelle. He saw little evidence of worsening consumer sentiment, so far. “Consumer incomes are still growing, albeit slightly slower than before Christmas.”
The company has reduced promotions, favouring lower regular prices instead, lowered operating costs and cut food waste. Sainsbury’s is expanding its “Waste less, save more” initiative to more than 140 city boroughs, towns and villages across the UK. About 5% of Sainsbury’s workforce hails from the EU, “an important part of our organisation,” Coupe said, when asked about the Theresa May’s triggering of article 50 to start the Brexit process, expected by the end of the month. “We are still in a very uncertain phase; as ever we’ll deal with whatever comes our way.”
The company blamed the dip in supermarket sales on the later timing of Easter and Mother’s Day this year, saying sales would have been up 0.1% otherwise – matching the 0.1% rise reported over the Christmas period, Sainsbury’s first sales growth since March 2016. The timing depressed sales of household goods, gifts and other general merchandise, down by 4%.
Argos enjoyed strong sales of mobile phones, video games, wearable tech and sports equipment in the latest quarter, boosted by the launch of Nintendo Switch console and SIM-free mobile phones.
The company plans to put 250 Argos outlets into Sainsbury’s stores over the next three years, up from 41 at present, with another 25 concessions planned for the next quarter. This will involve some Argos highstreet closures.
Coupe described the group’s food performance as solid and said its Tu clothing brand had again beaten the market, with sales up 5%. He was confident of achieving City forecasts for the full year, a pretax profit of around £578m.
Sainsbury’s has extended its pre-prepared vegetable range with products such as butternut squash waffles and sweet potato tagliatelle. The company has also reduced promotions, favouring lower regular prices instead, lowered operating costs and cut food waste. Sainsbury’s is expanding its “Waste less, save more” initiative to more than 140 city boroughs, towns and villages across the UK, but appears to have scaled back its bid to get consumers to halve household waste. Coupe denied that the target had been ditched.