Sainsbury’s posts a better-than-expected Christmas quarter

British grocer Sainsbury’s posted a better-than-expected performance in the Christmas quarter, though it was still hurt by a loss of share to discounters and an intensifying industry price war.

The group, which trails Tesco and Asda by annual sales, said on Wednesday sales at stores open over a year fell 1.7 per cent, excluding fuel, in the 14 weeks to January 3, its fiscal third quarter.

That was better than analysts’ forecasts of down 2.5-4.4 per cent and represents an improvement from a second quarter decline of 2.8 per cent.

Sainsbury’s total third quarter sales fell 0.4 per cent, excluding fuel.

The firm said the outlook for the remainder of its 2014-15 year was set to remain challenging, with food price deflation likely to continue.

“Given the uncertainty in the trading environment, food price deflation and the price reductions we announced this week, we currently expect our fourth quarter like-for-like to be similar to that of our first half,” it said.

First half like-for-like sales, excluding fuel, fell 2.1 per cent.

Up until the fourth quarter of Sainsbury’s 2013-14 year, it had been outperforming rivals, reporting nine unbroken years of sales growth with a strategy focused on own-brand products, on the quality of its food and on expanding its fast-growing convenience and online businesses.

But it has since posted four straight quarters of falling sales as discounters Aldi and Lidl won market share from the established grocers, consumers shopped around to save money and an industry price war escalated.

Sainsbury’s, whose shares have fallen 36 per cent over the last year, said in November it would cut costs, dividends and new store openings to fund an additional investment of £150 million (€191 million) in lower prices. It also cautioned that it expected supermarket like-for-like sales to fall for the next few years.

This week Sainsbury’s lowered prices on over 700 products, including reductions in its meat, fish and poultry categories.

Asda said on Tuesday it was investing £300 million in the first quarter of 2015 on reducing prices on essential items and branded products. That investment forms part of the £1 billion the grocer said in November 2013 it would spend over five years.

New Tesco boss Dave Lewis is also expected to try to defend market leadership with further price reductions of his own. Tesco will update on trading and strategy on Thursday.

Reuters