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Sainsbury's puts sales growth slowdown down to price cuts

London

SAINSBURY'S, Britain's second biggest supermarket group, said sales growth slowed over the past three months because of price cuts and denied it had been distracted by its deal to take over rival Asda.

The group agreed to a £7.3 billion (S$13.2 billion) takeover of Walmart-owned Asda in April. The combination, which would overtake Tesco as Britain's biggest supermarket chain, is being looked at by Britain's regulator, the Competition and Markets Authority (CMA).

Retail like-for-like sales, excluding fuel, rose 0.2 per cent in the 16 weeks to June 30, Sainsbury's said on Wednesday, giving figures for the first quarter of its financial year. While that was ahead of analysts' average forecast of a 0.1 per cent fall it was markedly below growth of 0.9 per cent in the previous quarter.

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"The main explanation is if you ... compare quarter four to quarter one, inflation in our business has dropped by about 1.5 per cent and that's as a direct result of investing in price," chief executive Mike Coupe said.

He pointed to price cuts totalling £150 million in fresh meat, fruit and vegetables since March and said they had resulted in an improved sales volume trend.

Mr Coupe said that while the quarter was one of significant change in Sainsbury's store management structures and also saw a rephasing of promotions, the Asda deal was not a factor.

He said Sainsbury's recently won the industry's main award for service and availability for the sixth consecutive year. "You don't do that if you are distracted by outside forces," he said. "Underlying we're pleased with the performance. We're focused on doing the day job."

Chief financial officer Kevin O'Byrne estimated there were only about 15 people in the organisation working on the Asda deal currently.

The CMA's probe is expected to be lengthy and Sainsbury's does not anticipate the deal being concluded until the second half of 2019. REUTERS