Sainsbury’s sales dip again: what the analysts say

“What’s very clear is that Mike Coupe’s strategic review needs to be implemented faster. There has to be greater urgency at Sainsbury’s or it will see bigger sales falls in the future. This is not one that will play itself out over time.

“Transactions may be up but any growth on this side is negated by prices that are falling across the board. With Tesco slowly dusting itself off under Dave Lewis, and its market share almost twice that of Sainsbury’s, it holds all the cards in the price game, with bigger margins to give back to its customers.”

John Ibbotson , director at Retail Vision

“Mike Coupe’s strategy definitely holds water and we hope that the City, which increasingly resembles the Premiership in terms of short-termism and impatience, is able to take a longer-term perspective and not expect miracles in times of such turbulence.

“While more minor irritants like Aldi and Lidl continue to nibble at Sainsbury’s, the more ominous threat will be a sustained, meaningful recovery from Tesco. Recent Worldpanel data show that Tesco might be exiting hibernation, and Coupe will need to be agile to fend off the resumption of heavy bombardment from Cheshunt.” 

Bryan Roberts, director of retail insights at Kantar Retail

“As silver linings go, it’s not a bad one. The value of sales is down, but volume is up as Sainsbury’s aggressive discounting has lured more people through the door. Those price cuts are hurting the bottom line in the short term, but in the long term might just stop the rot.

“Sainsbury’s has invested well in profitable, smaller format stores and this is helping the overall numbers. But it takes a lot of them to make up for its underperforming large stores, where investment is low and some are looking tired.

“The Sainsbury’s marketing department should focus less on winning awards and concentrate on giving customers a reason to visit their stores every week. Over-thought and fussy campaigns like their ‘Christmas in the trenches’ ad might garner column inches and clicks, but in the current price conscious market are unlikely to convert into enough sales to justify the expense.”

Phil Dorrell, director of the retail consultancy Retail Remedy

“We have to say that the out-turn is better than we feared.  An overall  negative performance will come as a surprise to few in the market, particularly following the strategic review in the autumn, where Sainsbury’s management joined the ‘club’ of gloomy industry wide executives.

“The financial out-turn that Sainsbury’s depends to some degree on prevailing market conditions. Central to those conditions will be the performance of Tesco, which is gradually regrouping after a sustained period of under-performance and near-term toil. Sainsbury’s is not passive in seeking to compete – outlined in management’s statements of 1100 price cuts and commitment to innovation - but it feels to us that it could be particularly negatively impacted by a sustained better out-turn from Tesco UK making Mr Coupe’s assertion that Sainsbury will outperform its peers all the more interesting.”

Clive Black, head of research at Shore Capital

 “Although these figures are disappointing at best, Sainsbury’s still possesses some strengths, most notably in convenience where it continues to add 1-2 stores per week. Like-for-like performance is considerably better in convenience than big-box, though its growth this time around was insufficient to offset declines elsewhere.

“We can only hope Mike Coupe and his team have something special up their collective sleeve to arrest the declines. Even for an accomplished retailer like Coupe, this may prove one task too far.”

David Gray, analyst at Planet Retail

“Reports that Sainsbury’s would be the worst in the industry have proved unfounded. Sainsbury’s report volume growth across the food business, showing they are likely retaining their ex-space growth volume market share.  

“On a crude word count basis, the word “value” is used three times and the word “quality” is used 3 times. Sainsbury’s continues to focus on both quality and value equally; not abandoning its differentiated offer.”

Bruno Monteyne, retail analyst at Bernstein

“The deflation outlook for 2015 does not get any better despite Sainsbury’s lower promotional participation and brand matching against Asda who have fewer branded lines.

“For some, this might look like a good relative sales performance, but Waitrose reported total  H2 sales were up 5.1% and trading profit was down 40%, so investors should now focus on H2 profitability and the 2015 margin outlook given the level of industry gross margin investment.”

Mike Dennis, food and retail analyst at Cantor Fitzgerald