Sainsbury’s chief executive Mike Coupe believes the performance of its larger supermarkets is “beginning to stabilise” following falling sales.
- Sainsbury’s boss Coupe says supermarket sales are “stabilising”
- He says there has been a “change in temperature” among shoppers
- Coupe believes grocery market remains a “very challenging trading environment”
- But he shrugs off impact of Aldi and Amazon in online grocery
Coupe, who labelled the death of the supermarket as “a gross exaggeration” during his keynote speech at Retail Week Live earlier this year, hailed a 1% increase in sales volumes and a growing number of transactions during the grocer’s second quarter update today as its larger stores wooed new customers.
Sainsbury’s has moved away from promotional activity and invested £150m in price, rolled out click-and-collect to 52 stores and launched a partnership with Argos to make better use of space in its larger sheds, which have become out of kilter with rise of convenience shopping.
Its big four rivals Tesco, Morrisons and Asda have experienced similar issues, with the latter piloting a tie-up with sportswear specialist Decathlon at its Watford superstore.
‘Change in temperature’
But Coupe insists he has observed a “change in temperature” during Sainsbury’s second quarter, which has seen shoppers return its larger supermarkets.
He said: “We have seen transactions grow – some of it is down to our existing customers buying more, but equally there are some new customers coming in.
“There’s been a downward trend in our underlying supermarket business for the last four or five years. We’ve seen some signs of that beginning to stabilise.”
Mike Coupe, Sainsbury’s
“One of the things we have certainly seen in the quarter is a levelling out in the performance of our supermarkets. That’s something that augurs well for the future and perhaps is an indication of a slight change in temperature from a customer point of view.
“It’s generally the case across all supermarkets, and it has been the case in our business, that there’s been a downward trend in our underlying supermarket business for the last four or five years. We’ve seen some signs of that beginning to stabilise.
“It’s very early days and I wouldn’t take one quarter’s worth of data as a definitive sign that things have turned around, but it’s certainly one of the encouraging things we’ve seen in the last quarter.”
Coupe’s comments came as Sainsbury’s forecast that full-year pre-tax profits would be “moderately ahead” of market expectations, despite a 1.1% fall in like-for-like sales during its second quarter.
Total retail sales during the 16 weeks ending September 26 edged up 0.3% as bosses insisted its strategy was “progressing well in a challenging market”.
However, Coupe warned: “I have a phrase which is: ‘only the paranoid survive’, so I don’t think I’d ever want to rest on our laurels. We have to constantly challenge ourselves to be better.
“You can’t get away from the fact that it continues to be a very challenging trading environment and the competitive dynamics haven’t gone away.”
The online grocery market in particular is poised to become even more competitive after Amazon began testing one-hour delivery on around 50 key chilled food products in Birmingham, while Aldi revealed plans to start selling wine and special buys online from 2016, although boss Matthew Barnes admitted the launch of grocery online was “not on our radar.”
Coupe shrugged off the launches as being “relatively small in the scheme of things” because the UK online grocery market “is probably the most developed and sophisticated in the world”.
“We have a very significant breadth of offer and that is many, many times greater, probably 100 times greater, than the competitors we are talking about”
Mike Coupe, Sainsbury’s
He added: “There are six very strong players already in that marketplace, so we will see how it pans out over time, but ultimately competition is a good thing. It makes us all better, it makes us ensure we are doing the best we possibly can for our customers.
“We have a very significant breadth of offer and that is many, many times greater, probably 100 times greater, than the competitors we are talking about.”
As part of that broad offer, Sainsbury’s boss Coupe said its new Tu clothing website was trading “exceptionally well”.
The grocer also started selling a limited range long-life goods online in China this month, following a tie-up with ecommerce giant Alibaba.
Coupe admitted it was “very early days” but said “breakfast is big” in China. Goods including UHT milk, granola and red label tea bags have already proved popular with consumers.
But Coupe again declined to provide an update on the progress of Netto – the Danish discounter Sainsbury’s penned a partnership with last June – other than to confirm it would open three more stores “in the next month or so.”