Sainsbury’s performance slips despite online and convenience growth
Published:  03 May, 2017

Sainsbury’s like-for-like sales fell slightly over the past full year, as did pre-tax profit, despite growth in online and convenience grocery channels and a non-food boost from its Argos acquisition highlighted by CEO Mike Coupe. 

The supermarket chain reported double-digit growth in group sales, but a 0.6% decline in like-for-like sales in the past financial year. Underlying pre-tax profit slipped down by 1%.

That said, the sales decline was slightly less marked than the 2015-2016 year, when like-for-likes fell by 0.9%.

In addition, the company reported 8% growth in groceries online and more than 6% growth in convenience. However, it stated the main contribution to group sales had been its purchase of Argos six months ago.

Jon Copestake, head retail analyst at the Economist Intelligence Unit, said: “The quandary that Sainsbury finds itself in is highlighted by the contrasting fortunes of its sales channels.

“Supermarkets, which represent the biggest chunk of revenue saw sales declines of 2% while smaller but faster-growing convenience and online channels saw sales rise by 6% and 8% respectively. While integrating Argos and delivering cost saving synergies Mr Coupe is having to manage a transition towards online and convenience shopping as well as offset the continuing price challenge from hard discounters such as Aldi and Lidl.

“This comes against a backdrop of rising costs and weakening consumer sentiment, all of which has been compounded by uncertainty around Brexit negotiations and the recent snap election announcement. In this context it would seem to be an understatement to say that Mr Coupe is steering Sainsbury through some fairly choppy waters.”

Own-label food sales accounted for about half of all its food sales, Sainsbury reported; volumes here grew by 2% and the retailer said it had invested in quality and price. It also increased sales and market share in new and growing categories such as On the Go, launched in September 2016, which included sandwiches with meat and vegetable fillings.

The ‘on the go’ market was worth £16bn and Sainsbury’s invested £8m in its range, introducing new sandwich and bread options, salads and sushi. It also increased the number of breakfast and snacking options on offer and improved existing lines. Snacking, in particular, had performed well, said Sainsbury’s, while its trial of in-store sushi concessions was also going well, it claimed.

The retailer said it had removed multi-buy promotions in a bid to reduce waste, although it would continue to invest in lower regular prices. It has opened six supermarkets and 41 convenience stores across the past financial year.

However, Sainsbury admitted that while it had grown convenience sales by 8%, supermarket sales declined by nearly 2%.

Over the coming financial year, Sainsbury said it aimed to open three new supermarkets and 25 convenience stores.

In the 52 weeks to 11 March, the retailer reported underlying pre-tax profit down by 1%, from £587m to £581m on like-for-like sales, excluding petrol, down by 0.6%. Group sales increased by 12.7%, from £25.8bn to £29.1bn compared to the previous year.

The business reported it was on track to deliver a three-year £500m cost-savings programme by the end of 2017/18, with a further £500m cost savings target over three years from 2018/19. It also reduced net debt by £349m to £1.5bn.

"This has been a pivotal year and we have made significant progress delivering and accelerating our strategy. Sainsbury's Group offers customers market-leading product choice, value and convenience, whenever and wherever they shop with us," said Coupe.

"Food is the core of our business and we are committed to helping customers live well for less. Our food business remains resilient in a challenging market and we continue to innovate in quality and to invest in price."