Sainsbury’s has revealed a 2.8% drop in like-for-like sales in its first trading update under new chief executive Mike Coupe. Retail Week takes a look at what the analysts say.
“While containing few surprises, this trading update from Sainsbury’s would seem to confirm that the retailer – hitherto reasonably insulated from the discounter chill – has started ceding shoppers to the more price-led retailers. In this context, a move to offer lower non-promotional prices is a welcome one, although we are less than convinced by the clarity of the messaging around it. Dropping Tesco comparisons from Brand Match appears a logical move given that Asda is the sector’s price leader, but then relentlessly comparing Sainsbury’s prices to Tesco prices in TV ads just muddies the waters. Fears over Sainsbury’s margins and the dividend will be intensified, particularly as Tesco will come out of the traps in 2015 with all guns blazing.” – Bryan Roberts, Kantar Retail
“With another quarter of declining like-for-likes, Sainsbury’s now knows for certain that it is in a fight. In recent years, Sainsbury’s has almost been observing the battle of the grocers from a privileged field position, but now it’s in the trenches with everyone else.”- James McGregor, Retail Remedy
“Our view is that Sainsbury’s new chief executive, Mike Coupe, needs to explain the changes to brand match, now focusing on Asda pricing and how that works better with their value simplicity pricing strategy which aims at lower base prices and lower promotional investment. We believe the key to the value simplicity strategy is growing like-for-like customer numbers and retaining loyal larger basket shoppers. The recent fall in fresh produce deflation to -4.7% in August (ONS figures) has obviously weighed on the whole industry and would have impacted Sainsbury’s more given its larger fresh produce participation.” – Mike Dennis, Cantor
“As expected, the supermarket price war has taken its toll on Sainsbury’s whose fantastic run of growth over nine years under former chief executive Justin King has come to an abrupt end. Performance over the last quarter has been very weak and the pressure is now on Mike Coupe to reassure shareholders that they are not sleepwalking into a Tesco-like crisis. The announcement to cut 5p off fuel and simplifying it’s ‘Brand Match’ offer will do little to mask the disappointing figures in today’s statement.” – Julie Palmer, Begbies Traynor
“This morning Sainsbury’s reported its second quarter like-for-like sales of -2.8%. This was a beat on consensus (-3.3%) and did not represent the worst results in recent memory (fourth quarter 2013 was -3.1%). There was continued focus on quality, convenience and Netto and most importantly: there wasn’t the bad news that so many people seem to be expecting: no profit warning, no dividend cut, no rights issue. While some may argue this is only a trading update, that didn’t stop Tesco and Morrisons to use those trading updates to bring forward bad news.
“We believe the market is not giving Sainsbury’s enough credit for its quality differentiation, how that reduces the cost of a potential price war, how such a price war will make Sainsbury’s more appealing to quality-seeking customers and how Sainsbury’s growth prospects are fundamentally better than all the other UK listed food retailers.” – Bruno Monteyne, Bernstein
“Sainsbury’s has reported what amounts to a very poor trading update for the company when set against the sector and where the group has come from over recent years.
“However…change is taking place. For example, Sainsbury’s movements on price last week and its opening of Netto stores (five by the financial year–end),indicate the commencement of a fight-back and an end to the ‘free-lunch’ enjoyed by the limited assortment discounters at the expense of the multiples.” – Clive Black, Shore Capital
“Today’s much-awaited second quarter trading update (for the 16 weeks to Sept 27th) from Sainsbury was widely expected to bring news of a 3%-4% slump in like-for-like sales, but the outcome was “only” -2.8% LFL (including a 0.2% benefit from store extensions) and Sainsbury says that the recent Kantar market share trends have been wrong! Nevertheless, Sainsbury has downgraded its second half like-for-like sales forecast from broadly flat to a similar level to first half, given the deflationary environment in the industry, although it makes no comment on margins or the P&L outlook”- Nick Bubb, independent analyst