Sainsbury’s sales have dropped further after it was forced to cut prices amid heavy competition from discount rivals.
Sales at stores open for more than a year fell by 1.1% in the three months to 24 September, compared with the 0.8% decline reported for the previous three months.
Shares in Sainsbury’s slid 3.5% to 242.2p in morning trading, as City analysts said the supermarket had slightly underperformed against expectations and appeared to be under more pressure in comparison with Morrisons and Tesco.
Mike Coupe, Sainsbury’s chief executive, said the fall in sales was driven by price cuts. Although a 1% dip in prices resulted in a drop in the total value of Sainsbury’s sales in the quarter, the reductions drew more people to Sainsbury’s tills and meant the group sold a higher volume of goods.
Coupe said there had been no discernible impact on customer behaviour after the EU referendum, and he thought there would not be any impact on shopping unless and until the UK’s step away from the union started to “interfere with or influence people’s day-to-day lives”.
“We expect the market to remain competitive and the effect of the devaluation of sterling remains unclear,” Coupe added. “However, Sainsbury’s is well positioned to navigate the changing marketplace and we are confident that our strategy will enable us to continue to outperform our major peers.”
He said Sainsbury’s would continue to make “targeted investments” in lowering prices, and had recently cut the price of nappies by 36% and broccoli by 20%.
The chief executive said food prices might continue to fall as a result of strong harvests in northern Europe and a drop in the price of oil. But he said there were other inflationary pressures, including a drop in the value of the pound against the dollar and the euro, and a drought in Brazil that had raised the price of coffee.
While food sales fell, Sainsbury’s performance was lifted by a 4% increase in general merchandise sales. But the supermarket admitted that its clothing sales had decreased slightly, despite the launch of Tu Premium, a more upmarket version of the Tu brand.
Coupe said Sainsbury’s first ever quarterly fall in clothing sales had come as a number of other retailers, including Marks & Spencer and Primark, also reported falls after unseasonably cool weather in June and warm weather in September.
“Relative to the competition, we have done well,” he said. “Clothing has probably been our most challenging area during the course of the last quarter.”
Sales at Argos, which Sainsbury’s took control of three weeks ago, rose 2.3% at stores open more than a year in the three months to 27 August, its best performance since 2014. It was a big step up in pace from the 0.1% reported for the previous quarter – Argos’s first quarter of growth in more than a year.
Sainsbury’s said it was not able to provide detail on how Argos’s sales had improved so dramatically and Coupe said his view of the merger had not changed.
“I have never not been confident about the deal. Customers’ habits are changing, shopping habits are changing very rapidly, driven by the rise of digital. Customers demand more utility and more speed, and Argos gives us the ability to serve customers in an increasingly rapidly changing world,” Coupe said.
Sainsbury’s convenience store sales rose by 7% over the quarter as it opened nine new outlets, while online sales were up by 8%.
