August 25, 2019

Sainsbury’s must wait out the storm

Sainsbury’s is in the midst of a perfect storm with falling industry-wide food prices and flat volumes combined with near-unstoppable discounter growth creating one of the toughest trading environments in almost a decade, according to David Gray, Retail Analyst at Planet Retail. Despite these factors, like-for-like performance has improved.

On Sainsbury’s Q2 results, Mr Gray commented: “Once again, Sainsbury’s has posted a subdued set of like-for-like numbers – though improving and markedly better than some arch-rivals, notably Asda. The simple fact is the retailer is reeling from the effects of industry-wide falling food prices and stagnant overall food volumes – which, combined, are proving a drag on sales.

“Add to this the twin threats of the growth of the German hard discounters at the value end of the market and Waitrose/M&S Food at the premium end and Sainsbury’s is stuck squarely at the centre of a perfect storm. Finally, the impact of Tesco’s nascent UK recovery on its smaller competitor has yet to filter through – and the chances are it will not be a positive one.

“Despite this, Sainsbury’s remains one of the best among a bad bunch –Asda and Morrisons being way behind on like-for-like performance. It also has some key attributes that will stand it in good stead going forward – a sizeable and growing convenience business, fewer very large hypermarkets than its rivals and a still-effective loyalty scheme in Nectar.

“It is also working tirelessly to adapt its big-box formats to a new retail reality through moves like the Argos shop-in-shops and investing in refurbishments to enhance the instore experience – all of which, we feel, will leave it better positioned when the present unfavourable headwinds have passed.”