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Sainsbury's sales fall for the first time in nine years as retailer warns of tough market conditions Sainsbury's sales fall for the first time in nine years as retailer warns of tough market conditions
(about 3 hours later)
Sainsbury's has ended its nine-year run of sales growth as the UK's second largest supermarket battles increasing competition from budget retailers. Sainsbury’s has reported its first fall in sales for nine years as outgoing chief executive Justin King warned the market is growing at its slowest rate since 2005.
The group revealed like-for-like sales- excluding fuel- fell 3.1 per cent in the 10 weeks to 15 March, signalling the first fall in sales growth after 36 consecutive quarters of rising sales. But King, who steps down at July’s annual meeting, said he did not wish he had left the hot seat earlier.
Sainsbury's said total sales-excluding fuel- fell 1 per cent in the fourth quarter. He said: “I’ve still got one more trading statement and then the full-year figures to go. It would have been a pretty bad show by me, to have missed out a poor quarter or two.”
Outgoing boss Justin King said the group came up against tough comparatives from a year earlier when it outperformed many rivals amid the horsemeat scandal and benefited from the timing of Mother's Day and Easter trade. King also made it clear that he sees no need to follow rivals such as Morrisons down the path of sudden steep discounting.
Mr King warned the industry is facing tough conditions in the latest downbeat trading statement from one of the "big four" food retailers as cash-strapped customers turn to discounters Aldi and Lidl. He said: “Our own brand costs 20 per cent less than branded goods and now makes up 51 per cet of our sales.
He said: "The market is now growing at its slowest rate since 2005, with falling food inflation in particular benefiting customers." "When the cutomer gets to the checkout with more Sainsbury brands in their basket than they used to, they soon realise that they are saving money.”
"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." Sainsbury’s sales from stores which have been open at least a year and excluding petrol were down 3.1 per cent in the 10 weeks to last Saturday.
That was marginally worse than most analysts had expected but not as distastrous as some had feared, in the immediate aftermath of Morrisons’ figures last week. Shares fell only 0.5p to 310.9p.
King pointed out that the latest 10 weeks’ trading had been affected by the weather and the later timing of both Mothering Sunday and Easter.
He said: “Discounters have been around for as long as I have. When I was account manager at Mars in the early Eighties, Kwiksave was a bigger account for us than Tesco.
“What I believe is happening is that customers are more engaged in more than just price. I always said at the start of the downturn that this would not be a race to the bottom on price and I still believe that.”
He also pointed out that Sainsbury’s had managed to hold its market share at 17% in the period. It also saw its convenience stores growing at 15% and recording one million transactions a day for the first time.
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.”
Richard Hunter of broker Hargreaves Lansdown pointed out that Sainsbury shares have fallen 21% in the past six months.
He said: “Investors’ general ennui with the sector at present is perhaps best illustrated by the fact that Sainsbury’s is currently the preferred play, even though the market consensus view comes in at no more than a ‘strong hold’.”