- Sainsbury’s first-half profits fall to lowest level since 2010
- Grocer’s investment in price drives up transactions and sales volumes
- Convenience and online businesses continue to grow
- Boss Coupe says Sainsbury’s is “on track” to deliver £500m in savings over three years
Sainsbury’s underlying pre-tax profit slumped 17.9% to £308m for the half year as the grocer continued to slash its prices.
The supermarket giant said group sales were down 2% to £13.6bn for the 28 weeks to September 26, as like-for-likes excluding fuel slipped 1.6%. Total retail sales were broadly flat, dropping 0.1%.
But Sainsbury’s hailed the impact of a £150m investment into price – £80m of which came during the first half – which drove the number of transactions up almost 3%, while sales volumes increased 1%.
The grocer declared it will “continue to remain competitive on price” in the midst of the ongoing price war, spearheaded by discounters Aldi and Lidl. The German duo have driven down margins across the sector as the big four cut prices in a bid to win back shoppers.
Sainsbury’s further reduced its promotional activity during the first half and it said customers “like our regular lower prices.” The strategy has also helped the grocer improve its forecasting of demand for products, improve availability and reduce waste.
Although food sales dropped 1%, Sainsbury’s said its Taste the Difference range reported 2% growth in volumes. It is currently ploughing cash into improving the quality of 3,000 own-label products as it bids to maintain its position in the market as “a leader in quality.”
Clothing sales rose almost 10%, aided by the launch of its Tu clothing website which has “exceeded management expectations”.
Convenience and online growth
Its convenience store business continued to grow as sales jumped nearly 11% during the period. Online grocery reported sales growth of 7%, with the number of orders increasing by 14% compared to the first half of last year.
Sales in Sainsbury’s superstore estate dropped 2.1% driven by food price deflation, lower like-for-like volumes and the impact of consumers shopping across various channels.
Sainsbury’s is currently trialling a new supermarket format and ‘micro’ convenience stores as it bids to adapt to changing shopper habits.
Boss Mike Coupe said: “We are making good progress against the strategy we outlined last November. We are delivering volume and transaction growth as customers value our quality improvements and our clearer, simpler message of lower regular prices.
“To complement our core food offer of great quality and inspiring food, sold at fair prices, we are delivering on our strategy to expand our non-food businesses with further growth in clothing, general merchandise and Sainsbury’s Bank.
“Our strategy of investing to ensure customers can shop with us across multiple channels remains a strategic advantage. Shopping at Sainsbury’s is now more convenient than ever for our customers and we are able to reward them for their loyalty.
“The grocery retail marketplace remains challenging but Sainsbury’s is a great business, run by an experienced management team, supported by talented colleagues and strong values. I am confident we are making progress and we are looking forward to a successful Christmas, offering our customers fantastic products and great value.”
Coupe added that Sainsbury’s is “on track” to deliver £500m in cost savings during the next three years. The grocer expects to save around £225m by the end of the current financial year as the programme moves “ahead of plan.”