Sainsbury's disappointing year continues as the supermarket reports another drop in like-for-like sales.
In its latest trading update, the company revealed that sales at its stores open for at least a year had fallen by 1.9 per cent in the ten weeks to March 14th, excluding fuel. Total sales across the company's operations were also down 0.3 per cent as price cuts and food deflation impacted on its performance.
The future is looking pretty mixed for Sainsbury's, not to mention the rest of the supermarket sector, with chief executive Mike Coupe stating that the market will "remain challenging for the forseeable future". He highlighted a number of factors that are set to play a part in the many obstacles that will appear over the coming months.
Mr Coupe said: "Food deflation is likely to persist for the rest of this calendar year, and competitive pressures on price will continue. However, we believe that the great value and quality of our products, combined with a strong focus on developing our multi-channel offer, will enable us to outperform our supermarket peers."
Despite the announcement, Sainsbury's saw its share price grow 1.27 per cent as of 10:09 GMT on Tuesday (March 17th).
Damaging price wars
One of the reasons behind the poor performance of many of the UK's supermarkets is the ongoing price wars. The emergence of discounters Aldi and Lidl has put considerable pressure on the traditional 'big four'. It has seen the likes of Asda, Tesco, Sainsbury's and Morrisons slash their prices to challenge the discounters.
Waitrose became the latest to be significantly affected by the issue and recently announced a 24.4 per cent drop in operating profits during 2014, despite posting a 4.7 per cent increase in revenue, compared to the previous year. This was mainly down to the reduction of prices across the board.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.