Sainsbury’s suffers sales slowdown as it battles fierce competition | City & Business | Finance

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The UK’s second biggest supermarket posted a 9 per cent drop in underlying half-year profit to £251million, thanks to lower prices and higher staff pay. 

It also absorbed losses from the Argos electricals chain it bought last year for £1.4billion. 

Sales were up 17 per cent to £16.3billion. But its same-store sales growth slowed to 0.6 per cent in the second quarter, compared with 2.3 per cent in the previous three months. 

Clothing sales remained strong over the half-year period while online and convenience businesses performed well, but grocery growth more than halved in the three months to September 23 and general merchandise turnover fell by 1.6 per cent from the previous quarter. 

CEO Mike Coupe said consumers were “very value-conscious,” while non-food trading was hit by the closure of about 100 Argos concessions in Homebase stores after the DIY chain was taken over by Bunnings. 

He said more customers had shopped at Sainsbury’s in the first half than ever before, while festive trading could be boosted by more Argos stores opening in its supermarkets by Christmas. 

Coupe said: “If you look at the more recent market data, we are at least holding our own, if not performing better than the overall market. 

“While the market remains competitive, we are well placed to navigate the external environment and we remain focused on delivering our strategy.” 

Sainsbury’s said it would beat its three-year cost savings target of £500million by the end of this financial year by £40million and is targeting a further £500million over the next three years. 

Despite remaining on track to meet annual profit expectations of £572million, Sainsbury’s shares fell 4¼p to 229¼. 

Ken Odeluga of City Index said: “Sainsbury’s, like most high-street businesses, is caught in a pincer of rising input costs and falling consumer real-wages growth. It is keeping prices low. But, unlike Tesco and Morrisons, there’s something wrong with its mix of store prices and supplier agreements, because the other two are reporting firmer underlying sales growth.”

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