This was a truly woeful set of numbers from Sainsbury’s, which if anything is even worse than the latest Kantar data indicated. Photo: Reuters
This was a truly woeful set of numbers from Sainsbury’s, which if anything is even worse than the latest Kantar data indicated. Photo: Reuters

Santa didn't stop for woeful Sainsbury's

By Neil Wilson Time of article published Jan 10, 2019

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JOHANNESBURG – This was a truly woeful set of numbers from Sainsbury’s, which if anything is even worse than the latest Kantar data indicated. 

After rising 1 percent in the second quarter, like-for-like sales ex-fuel declined 1.1 percent in the thired quarter versus estimates for a roughly 0.3 percent drop. Total retail sales were down 0.4 percent. For the previous six quarters total retail sales were averaging growth well in excess of 1 percent, highlighting the kind of downtick seen in the vital Christmas period. Customers are cautious but Sainsbo's should be doing better.

At a time of gently rising inflation and improving real wages Sainsbury’s ought to be enjoying growth in group sales. There have been for some time question marks over the store offering and presentation, which is starting to look like a persistent problem. Following the Argos takeover and proposal to merge with Asda, there is a clear sense management is taking its eye off the basics, albeit Grocery sales did rise 0.4 percent. 

Argos, which has been a real jewel in the crown, really flopped with General Merchandise sales down 2.3 percent. Clothing was also down 0.2 percent. It does appear Argos sales have been a bit softer than the market anticipated despite the rollout of more shop-in-shops in the last six months and the investment in technology.

Discounters are having a big impact

Overall, clearly the discounters are having a big impact, but with the exception of a mega tie-up with Asda it’s hard to see what Sainsbury’s is doing to combat them effectively.

Competition is fierce, but it’s not just discounters like Aldi and Lidl parking their tanks on Sainsbury’s lawn. Sainsbury’s did well when Tesco was facing problems and Morrisons was a long way short of where it is now. 

Both of those have undergone impressive turnarounds – the question is whether Sainsbury’s faces up to the fact that in core grocery at least it too needs to turn the ship around. At present it’s putting all it eggs in one basket with the planned Asda merger, but if that fails where does it leave the business?

On the merger, we got 30 minutes of extra time from the CMA but the outlook is murky. It still seems, on balance, likely that the CMA will reject the merger. However, with the rise of discounters one has to ask if the big four is already an anachronism. How the CMA views these discounters within the market competition framework is crucial. 

Ted Baker meanwhile is looking on the front foot despite the controversy around its founder. That aside, sales are positive. Ted Baker, it must be said, is less a UK high street retailer than a global brand that is far less dependent on fickle British consumers than most. Investors should embrace that fact.

Promotions and discounting are affecting margins

Sales rose 12.2 percent, or 10.5 percent on a constant currency basis, in the five weeks through to the start of January. Promotions and discounting are affecting margins but full year results are seen in line with expectations.

Finally Mothercare – where to begin? Yes the transformation programme is underway with cost savings promised. But the sales figures appear very grim indeed, albeit generally the market has accepted it's going to be very choppy sailing until land is sighted.

UK like-for-like sales decline 11.4 percent. Far more worryingly online sales fell a whopping 16.3 percent, impacted management says by ‘lower website footfall’. So it’s not just lower high street footfall these days but also lower website footfall. There has to be fair been a lot less discounting compared to last year.

The store closure programme is ahead of schedule with the plan for 79 UK shops against 137 a year ago. The international market is seen picking up but in the UK the outlook is still very cautious. A fresh warning on profits maybe coming?"

Neil Wilson is chief market analyst at

The views expressed here do not necessarily reflect those of Independent Media.


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