Sainsbury’s shares rise as Coupe insists store strategy is working
SHARES in Sainsbury’s rallied yesterday as the supermarket chain insisted it was seeing “encouraging signs” of recovery, despite reporting its sixth consecutive quarter of declining underlying sales.
Britain’s third-largest grocer said total sales fell 0.6 per cent, while sales at stores open more than a year fell by 2.1 per cent, excluding fuel, in the first quarter to 6 June.
That was in line with analysts’ expectation but worse than the 1.9 per cent decline in the previous quarter.
However chief executive Mike Coupe said the company had started to see underlying volume and transaction growth, driven by its price cutting plan and investment in product quality and availability outlined at the time of its strategic review in November.
“We’re pretty pleased with that and actually we’re slightly ahead of where we expected to be at this stage,” he said, adding that more customers were visiting its stores.
“We haven’t turned a corner just yet but we are seeing some encouraging signs,” Coupe said.
Shares closed up 4.5 per cent last night to 260.33p on the back of Sainsbury’s upbeat remarks.
Cantor Fitzgerald analyst Mike Dennis suggested the grocery retail sector may be close to the bottom of the cycle “and in a similar position to the end of the 1989-92 recession cycle when discounters were making strong inroads into the UK market.”
Sainsbury’s, in common with its major rivals, is battling to win back ground against discounters Aldi and Lidl through price cuts. All players are also dealing with record commodity-driven industry price deflation.
Recent market data from Kantar Worldpanel shows that the deflation in the market combined with the price cuts embarked on by the big four is also taking its toll on the discounters.
Sainsbury’s chief financial officer John Rogers suggested that the narrowing of the price gap with discounters meant that “those that would have shopped around are now thinking that it is more economical to do it all shopping under one roof.”