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Sainsbury's sales fall for first time in nine years Sainsbury's sales fall for first time in nine years
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Sainsbury's sales have fallen for the first time in nine years in what the supermarket group said was the slowest market for almost a decade.Sainsbury's sales have fallen for the first time in nine years in what the supermarket group said was the slowest market for almost a decade.
Sales at stores open a year fell 3.1%, excluding fuel, in the three months to 15 March and sales at all stores dropped 1%, ending a run of 36 quarters of growth under departing chief executive Justin King.Sales at stores open a year fell 3.1%, excluding fuel, in the three months to 15 March and sales at all stores dropped 1%, ending a run of 36 quarters of growth under departing chief executive Justin King.
Britain's second biggest supermarket chain also blamed last year's horsemeat scandal for the decline because Sainsbury's gained sales a year ago when its rivals' products were found to contain horse. King, who leaves in July after leading Sainsbury's for 10 years, admitted the sales fall was "disappointing" and that Sainsbury's had been caught out by shoppers' restraint and late Easter shopping.
King, who leaves in July, admitted the sales fall was "disappointing." He said: "We have seen a decline in sales in the quarter reflecting tough comparatives. This time last year our sales benefited significantly from the discovery of horsemeat in some branded and competitors' products. "The market has been significantly softer since Christmas. We probably underestimated the impact of Easter being later and [that] customers would hold back until the very last minute for Easter."
"The market is now growing at its slowest rate since 2005, with falling food inflation in particular benefiting customers. The later timing of Easter and Mother's Day, which fall in quarter one of our new financial year, and unseasonable weather have also contributed to lower market growth year-on-year." He said Sainsbury's had maintained its market share at 17% in the weakest market for grocery sales since 2005 and that he was unconcerned about talk of a price war between the big grocers.
King said the company had maintained its market share at 17% despite the falling sales. "Grocers more generally have found growth hard to come by in recent years and the pricing pencil is being sharpened but it was ever thus."
Sainsbury's had a record Christmas but has warned that households squeezed for years by rising prices and stagnant wages would be wary about spending this year. Last week Morrisons pledged to spend £1bn over three years to take on German discounters Aldi and Lidl, which have attracted mainstream shoppers with low prices on basic goods.
King said Morrisons' boss Dalton Philips was wrong to say the grocery sector was in its biggest shakeup since the 1950s.
He said: "You won't be surprised to hear I don't share that assessment. Dalton was commenting on Morrisons' results, which represent a number of years of falling sales."
King said the market was tougher during the recession of the early 1990s when discounters such as KwikSave had more of the market and unemployment was higher.
"It always feels like the experience you are having today is something new and unique."
Unlike Morrisons, which shocked investors with its second profit warning of 2013, Sainsbury's made no change to its guidance on profit for this year. Commmercial director Mike Coupe, who will take over from King, said: "Given we are not commenting today, we don't expect to see [City analysts'] consensus change."
Sainsbury's also blamed last year's horsemeat scandal for falling sales because Sainsbury's gained sales a year ago when its rivals' products were found to contain horse.
Sainsbury's managed to increase like-for-like sales throughout the economic downturn as Tesco and Morrisons were pressured by the German value chains at one end and the rise of upmarket Waitrose at the other.
He said Sainsbury's own brands and its convenience stores meant it could take on the German value chains at their own game.
King said the outlook was improving with inflation easing the strain on household budgets but that trading would stay difficult.
"Although some economic indicators are showing an improvement in the health of the economy, we expect the outlook for customers to continue to be challenging for the coming year," King said."Although some economic indicators are showing an improvement in the health of the economy, we expect the outlook for customers to continue to be challenging for the coming year," King said.
Britain's big four supermarkets have come under pressure from the German chains Aldi and Lidl, which have attracted mainstream shoppers with their low prices on basic goods. Morrisons last week stunned investors with a huge profit warning and said it would spend £1bn over the next three years to take on the German value chains. Shares of Sainsbury's and Tesco have fallen sharply since Morrisons' announcement as investors have worried that a genuine price war could break out in the sector, reducing profits. Sainsbury's shares fell more than 1% in early trading but recovered to rise 0.3% to 312p.
King told the BBC's Today programme Sainsbury's had thrived by offering good value and also quality products: "Clearly Morrisons' explanations for their difficulties are for them to make. Their sales have been in decline for a couple of years.
"The reality of the retail market, regardless of what competitors are in it, is you have to stay singlemindedly focused on your customers."
He said Sainsbury's would continue to perform better than its competitors this year.