Sainsbury's Justin King: 'The toughest Christmas trading environment in my 30 years of retail'

“You always believe that the last Christmas was the toughest ever, but it seems like this one really was,” said King. “If you take all of the market information and the quarter as a whole, then the overall market is flat or in slight decline. This is the first time that has happened in my 30 years of retailing.”

King said the economic environment is “tougher for customers today than it has been in a generation”.

He said Sainsbury’s had delivered a “big beat to the market” with its third quarter results, up 0.2% like-for-like sales excluding petrol, but said the trading environment is “very tough”.

King said October and November were “very challenging” with customers tightening their belts following a strong summer, and in order to save for Christmas. “We had a strong summer as customers enjoyed the good weather, so in early October we saw a post-splash out effect,” he said.

“The biggest damp squib this year was Halloween and Bonfire night which suffered due to the extraordinarily wet and windy weather. We only saw a small tick up this year.”

King said the week before Christmas was incredibly busy though, and meant that the grocer still reported a record Christmas.

Chief finance officer John Rogers said that volumes were in decline and guided that the grocer will miss its 1-1.5% like-for-like sales figure for the full year. “We’re likely to see a similar performance in Q4 as in Q3 so the full-year guidance will now be just below 1%,” he said.

King said customers are being more thrifty than ever – wasting less, shopping around, making shopping lists, and also buying “a bit less but better quality”.

He said while employment has been created, “the vast majority have less money in their pockets than a year ago”.

King added: “Believing that job will be there in six months or a year’s time is also a key factor. It is only when you have confidence of job security that you will take out a mortgage or buy a higher ticket item.”

King acknowledged the competition from hard discounters such as Aldi and Lidl but said: “The discounter effect is a year round effect, not just at Christmas. They [the discount stores] are part of the many choices customers now have.”

He said discounters’ advertising at Christmas focused “disproportionately” on quality and noted that the Sainsbury’s top-end Taste the Difference range is growing at over 10%, showing customers shop for quality at Christmas. “The discounters have also widened their range and have around twice as many items as they did three years ago.”

Commercial director Mike Coupe also added that the overall market saw an “unprecedented” level of vouchering and couponing at Christmas. “There was a significantly greater level of vouchering this year,” he said.

Sainsbury’s reported its online groceries business was up over 10% in the quarter, slightly slower growth than the previous quarter.

Coupe said that its new website had been phased in during the last quarter so the grocer did not carry out as much marketing of its offer in order to smooth the transition.

He said the website’s back-end is in place and in the quarter it trialled the new front-end in delivering from 25 stores in West Sussex and Scotland. This will be rolled out to the remainder of Sainsbury’s stores over the next six months with the grocer ironing out any issues along the way.