When Sainsbury’s and Asda lifted the lid on details of their proposed merger back in April, many analysts suggested it was the latter business which most needed the combination.

Years of underinvestment under Walmart’s ownership, a brain drain to Bentonville and stalling sales had left Asda playing catch-up to its mainstream rivals and the discounters.

Sainsbury’s was seen as the prospective parent that could breathe a fresh lease of life into the grocer, deliver synergies and lower prices to cut the differential to Aldi and Lidl and win back shoppers.

Seven months on, the conversation has flipped somewhat.

“Sainsbury’s could be accused of drifting off of its firmly trodden grocery path”

Asda is slowly but surely mounting a fightback under the tutelage of Roger Burnley – a 2.4% increase in like-for-likes in the 12 weeks to June 30 marked its fifth consecutive quarter of growth – and there is a renewed sense of confidence within the corridors of Asda House.

Sainsbury’s, on the other hand, could be accused of drifting off of its firmly trodden grocery path.

In many ways, Sainsbury’s deserves great credit for what it has achieved over the past few years. It has shown a foresight, ambition and desire to diversify and digitally transform itself in order to compete head on with the likes of Amazon.

And on that front, there were a few reasons for Sainsbury’s to be cheerful in today’s half-year results.

Online grocery sales grew 6.9%. General merchandise sales – now a crucial part of the group following the Argos acquisition – advanced 1.5%.

The £160m of EBITDA synergies Sainsbury’s targeted following that £1.4bn buy have been realised, nine months ahead of schedule.

Purchases fulfilled through the Fast Track same-day delivery proposition jumped 18%.

Nectar, the loyalty business Sainsbury’s acquired in February, now has 19 million users and is shifting to a smartphone app.

And the grocer is trialling a new beauty concept, stocking 1,400 SKUs in seven of its larger stores, in an attempt to tap into a booming cosmetics market.

A lot on its plate

That brief snapshot alone – which does not take into account the bank or the proposed Asda merger – demonstrates just how much the ever-growing Sainsbury’s has piled onto its plate.

When you are juggling that many balls, it’s almost inevitable that one or two will be dropped.

In Sainsbury’s case, the core food business has fallen behind its rivals at a time when it should be prospering. Total grocery sales did climb during the 28 weeks to September 22, but at a rate of just 1.2%.

GlobalData analysis suggests the wider grocery market grew 2.7% during the same six-month period.

“Considering a dream summer combination of sun and sports boosting food sales, these results are far from impressive,” GlobalData analyst Thomas Brereton suggests.

“Sainsbury’s needs to keep at least one eye on its day-to-day retail operations, or growth will continue to lag behind the other supermarkets”

GlobalData analyst Thomas Brereton

“Q2 sales growth of 2% is also uninspiring given the greater uplift experienced at Sainsbury’s rivals.”

Brereton warns: “In a highly competitive food and grocery market, Sainsbury’s needs to keep at least one eye on its day-to-day retail operations, or growth will continue to lag behind the other supermarkets.”

Bearing a disappointing food performance in mind, it is perhaps unsurprising that Mike Coupe was asked today: “Is it a grim future for Sainsbury’s without the Asda deal?”

“Not at all,” was Coupe’s resounding rebuke. “We have a clear strategy and you can see in the numbers today we are delivering against that strategy. We are adapting our business to changes in customer behaviour and we will continue to do so.

“We are confident in our future whatever basis that future is.”

One former Asda executive suggests that, after the CMA identified 463 overlaps between Sainsbury’s and Asda stores, it is now “70-30 that the deal won’t happen” – leaving Sainsbury’s to go it alone in its current form.

Coupe’s confidence in the retailer’s ability to do exactly that stems from the performance of Argos, and an insistence that availability issues in its food business, which in part caused the market-lagging growth in its first half, have been resolved.

With Christmas just around the corner – a time of year when Sainsbury’s typically comes into its own – Coupe and his business will soon have that claim put to the test.

If it fails to pass that test, the combination of two grocery powerhouses that the Asda merger will bring begins to look ever more crucial to Sainsbury’s fortunes.

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