Sainsbury’s festive sales dip mars market share growth
A popular marketing campaign combined with over 30 million customer transactions in the week before Christmas were not enough to prevent a sales dip over the period for Sainsury’s despite its market share improving.
The UK’s second biggest supermarket reported lower than expected sales in the 15 weeks to 9 January at 0.4 per cent. Analysts had predicted a small rise for the retailer, which had gained the highest market share of the big four during Christmas according to Kantar to lead the fightback against the discounters.
Despite, the sales blip, chief executive Mike Coupe stressed what he believed to be strong parts of the company’s strategy, including 16 convenience stores opening in the quarter, its “biggest ever day” for convenience sales on 24 December as well as online sales up nearly 10 per cent and orders up 15 per cent. The supermarket boss also credited its festive campaign ‘Mog’s Christmas Calamity’, which generated nearly 37 million views, while the tie-in book topped the UK bestselling charts for four consecutive weeks.
The encouraging signs mean the business expects to deliver better sales in the second half, despite difficulties.
“Food deflation and pressures on pricing will ensure that the market remains challenging for the foreseeable future,” cautioned Coupe. “We will continue to remain competitive on price and our performance this quarter provides further evidence that our strategy is working.”
Part of the confidence comes from faith in ongoing investments to curb tactical pricing and promotional activity, while Coupe has also prioritised expanding its data offering this year to deliver more personalised services.
While sales and profits are down on the same time last year, both volume and market share are up, suggesting that Sainsbury’s is adapting better than most to the current environment. Morrison’s, which has arguably suffered the most amid the rise of the discounters, revealed yesterday a slight sales increase over Christmas, though it did lose market share.
“All the indicators are that Sainsburys is focussed on long term strategic goals,” said Phil Dorrell, partner at Retail Remedy.
“Improving margin fitness is what Sainsburys are now looking for. Literally hitting the gym is working for 3 of its stores but others will have to look at a diet of cost cutting to make up some margin.”
It’s the first financial statement from the business since it made a bid for the Home Retail Group, a move likely done with a view to expanding its convenience offering as well as moving into new categories.
John Ibbotson, director of the retail consultancy Retail Vision, added: ““As unofficial grocer to the middle classes, Sainsbury’s has seen fewer customers desert it in favour of the German discounters than its big four rivals, but its leadership has shown itself to be anything but complacent.
“The plan to cross-sell Sainsbury’s and Argos stock could potentially create a rival to Amazon. While the idea has drawn a decidedly mixed reaction from investors, Mike Coupe is an assured operator and might just pull it off.”