Sainsbury cuts prices after supplier talks

By Matt Atherton contact

- Last updated on GMT

Sainsbury had worked with suppliers to reduce prices
Sainsbury had worked with suppliers to reduce prices
Sainsbury has “worked with suppliers” to cut its prices lower than the other big four supermarkets, claimed the retailer in its first-quarter trading report.

Britain’s second largest supermarket reported a 2.3% rise in Retail like-for-like sales, excluding fuel, during first-quarter trading, in the 16 weeks to July 1. Sainsbury worked with suppliers by investing in product innovation and by reducing retail prices, it said.

Sainsbury group chief executive Mike Coupe said: “Customers recognise that we offer a leading combination of quality and value and we have worked with suppliers to improve our price position versus competitors.”

Total sales increased

Total like-for-like sales (excluding fuel) increased 2.3% over the 16 weeks. Sainsbury’s Groceries Online sales were up 8%, while its Convenience division sales were also up 10%.

Sainsbury results – at a glance

  • Like-for-like sales (excluding fuel) up 2.3%
  • Grocery sales up 3%
  • Groceries Online sales up 8%

The Produce division performed “particularly well”​, after volume growth increase by more than 1%, Sainsbury said.

“We have delivered a strong performance, driven by our differentiated strategy, offering customers quality, value and choice across food, general merchandise, clothing and financial services,”​ said Coupe.

Invested in product innovation

Sainsbury said customers were able to enjoy “fantastic prices”​ on Jersey Royal potatoes and British strawberries during summer, after supplier talks on prices. The summer eating range was developed after the supermarket invested in product innovation, it said.

The supermarket was on track to meet its £145M cost savings target this year. It was also on track to deliver its three-year £500M cost reduction target, it added.

Coupe said: “The market is competitive and we continue to manage cost price pressures closely. Our strategy is delivering and we are well placed to navigate the external environment.”

FoodManufacture.co.uk has asked Sainsbury for more information on price reductions.

Meanwhile, in May, Sainsbury reported its full-year profits before tax had fallen 8.2%​ to £503M. Its food business remained resilient in a difficult market, it said.

What the analysts say about Sainsbury

  • “Management makes reference to 1% volume growth in fresh produce, where Sainsbury traditionally outperforms; a category that should have particularly benefited from the weather and southern bias of the group’s stores in recent months.”

Clive Black and Darren Shirley, Shore Capital

  • “The sun has shone down on Sainsbury this summer helping to boost their sales. This demonstrates what a difference the weather can make to our spending habits – people have been tightening their purse strings in the run up to Brexit but all it took was a bit of sun to bolster supermarket sales.”

Martin Lane, money.co.uk

  • “Sainsbury’s has been the clear underperformer in underlying food sales among Britain’s large grocers for coming up to about a year, so the move to consolidate same-store Argos and supermarket figures inevitably raises the question of whether the group is window dressing.”

Ken Odeluga, cityindex.co.uk

  • “With inflation running at around 3%, it seems that Sainsbury sales can be at least partially attributed to passing on rising costs. Secondly, relative to other UK supermarkets, notably discounters like Aldi and Lidl, Sainsbury is still losing share.”

Jon Copestake, Economist Intelligence Unit

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