Sainsbury’s has seen its first falling sales figures in nine years, but is this a sign of the times or just a temporary slump?
First came Morrisons, reporting a fall in profits in its latest annual results. Now, as the big supermarkets compete with their discount rivals, Sainsbury’s is the next company to reveal the damage.
It’s by no means as serious as the predicament of its rival, but Sainsbury’s published figures indicate that it too has been hit in recent months. In the first quarter of this year, it reports that like for like sales have declined for the first time in the nine years since chief executive Justin King stepped in. Sales from stores that have been open at least a year slipped by 3.1 per cent excluding petrol.
Given that Sainsbury’s has been on what seemed like an unstoppable upward trajectory since Mr King took over, it might appear to some as though something has gone suddenly wrong. But the supermarket did perform well in the first quarter of 2013, which meant it had plenty to live up to – with big seasonal promotions put off thanks to Easter and Mother’s Day falling later in the year, at least some of the decline can be put down to simple seasonal variation.
Still, it’s clear that like the rest of the “big four” supermarkets Sainsbury’s is coming under pressure from cheaper rivals like Aldi and Lidl, while Waitrose and Marks and Spencer are encroaching on the luxury categories. But while Morrisons has responded to market pressures by announcing investments in steep discounting, Sainsbury’s is refusing to get embroiled in a price war, trusting instead to the appeal of its own offerings.
“We continue to see growth in our own-brand ranges, significantly ahead of branded products, with penetration now at 51 per cent, versus 47 per cent for the market,” said Mr King. “Our own-brand products are, on average, 20 per cent cheaper than a branded equivalent and are also supported by the values that our customers expect of us.”
That optimism may be justified. After all, Kantar Worldpanel found that Sainsbury’s has held onto its overall market share year-on-year at a time when Waitrose, Aldi and Lidl all gained and Tesco, Asda and Morrisons saw their shares reduced. But with Mr King stepping down in July and more troubled times ahead for the major supermarkets, it remains to be seen how sustainable this will be.
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