Sainsbury slips further behind rivals

Related tags Sainsbury Tesco Asda Morrisons

Sainsbury, the UK's number three food retailer, is falling further
behind rivals Tesco and Asda with a decline in like-for-like sales
during the second quarter of the year. The company also faces
increased competition from a combined Morrisons/Safeway in the
coming months.

Erstwhile UK market leader Sainsbury​ continues to fall farther behind its rivals - and with several smaller players also outperforming it on a regular basis, the company faces further declines in market share in the near future.

The company has reported second quarter like-for-like sales down 0.2 per cent at its core UK business, a poor performance given the strong like-for-like growth announced by the likes of Tesco and Morrisons in recent weeks.

The company said that sales at its Sainsbury's Supermarkets division in the UK were up 1.2 per cent for the quarter, helped by new store openings, but this too was a decline compared to the earlier part of the year. First quarter sales were up 2 per cent, while like-for-like growth was 0.3 per cent during the first three months of the year.

Sainsbury has been restructuring its business for several years now, but this excuse is sounding increasingly hollow as the company persistently fails to show any improvement.

"We are in the final stages of our ambitious business transformation programme involving a new IT infrastructure, new supply chain and modernised stores,"​ said Peter Davis, Sainsbury's chief executive, who must be getting increasingly tired of trying to gloss over disappointing results.

"Sales are being disrupted as we build solid foundations for future growth. Our trading in this quarter has been similar to that of quarter one. While we are not satisfied with our current sales performance our first priority is to complete the programme. We have also had to restrict flexibility while implementing new systems."

Davis said that the company's transformation programme would be completed by March next year, and the company's results in the first two or three quarters after that will certainly make for interesting reading.

Sainsbury will be able to mop up a number of the stores - around 24, it estimates - sold off by Morrisons as part of its takeover of Safeway, which should help bolster its business a little, but the Safeway deal will of course make Morrisons a much stronger competitor for Sainsbury, not least because of its low price policy.

Davis said that the transformation programme had helped improve customer satisfaction, and while this is an increasingly important part of the modern shopping experience, it is no replacement for low prices - traditionally Sainsbury's weakest point.

Morrisons, Tesco and Asda, the other three main players in the UK market, all focus on keeping their prices as low as possible, and their sales figures reflect the success of this policy. For example, Tesco recently announced first half like-for-like sales growth of around 6 per cent while Morrisons' like-for-like sales grew by 9 per cent in the first half.

Sainsbury has also used the argument that its store refit programme has disrupted sales, but store revamps are a regular occurrence for any supermarket retailer and the company should be able to handle it more successfully, even on a large scale.

Moreover, those store refits which have already been completed appear to have had little effect on sales growth at the company - in contrast to, say, Iceland, which is also rolling out a new format in all of its stores but which has registered substantial sales improvements following the changes.

Davis highlighted the few positive points in Sainsbury's figures - a solid performance from its Shaw's business in the US and a rise in underlying profits during the first half - but he will, it seems, have little more to boast about when the company announces its official first half figures next month.

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