Sainsbury’s may have enjoyed a roaring Christmas, but its clothing and general merchandise divisions had a disappointing festive performance.
The second largest supermarket chain in Britain increased its sales 7.4% in the 16-week period ending January 6, compared to the same time in 2013. This was due to a 9.3% increase in its grocery division, which it said showed that it had gained market share.
Sales in the general merchandise division, which includes Argos and other retailers, fell by 0.6% during this period. Clothing sales also dropped by 1.7%. The group’s shares fell by 19 1/2p or 6.3% to 286 1/2p as a result of the performance.
Simon Roberts is the CEO of J Sainsbury. He said that the merchandise business was hit by the unseasonable weather, and the “highly promotional market”. He said that the merchandise business was also compared to the same period of 2022 when energy costs were higher and Britons bought more jumpers, air fryers and electric blankets.
When asked when he expects the division to resume growth, he stated that the general merchandise sales in the Republic of Ireland were up 1.5% in the third quarter, excluding Argos store closures.
Sainsbury’s performance reflects the wider industry, which shows that grocery sales were strong during Christmas. However, cost-of-living pressures impacted demand for other products. Aldi and Lidl reported a bumper festive trade, while JD Sports Fashion the clothing retailer issued a profit warning following fewer sales than expected in the “golden quarter”.
Roberts, Sainsbury’s 52-year-old leader since June 2020 has made its food business a priority. He has closed lossmaking Argos stores, removed counters, and invested in lowering the prices of the chain’s Nectar and Aldi price match programmes. Sainsbury’s has been able to reduce prices in order to combat the perception that it is the most expensive among the Big Four supermarkets, which includes Tesco, Asda, and Morrisons.
These efforts have paid off. Roberts stated that Sainsbury’s continued to gain market share over the Christmas period. He said that Sainsbury’s had grown its volume faster than Aldi in the third quarter and outperformed the competition every week. “The fact that we’ve seen switching from our major competitors is encouraging.”
Sainsbury’s achieved its highest market share in December 2020 at 15.8%. Tesco holds 27,6 percent of the market. Lidl, Aldi, and Lidl hold 7,7 and 9,3 per cent respectively.
Roberts denied claims that the supermarket chain “deceived” customers. This was after Which?, a consumer group, accused the supermarket of misleading shoppers about savings offered by loyalty card schemes. He said that the supermarket chain has very strict rules on what a Nectar Price is. “The customers have bought into Nectar’s prices. We have always given the best price and will continue to do so.
He said that the customers are also beginning to see benefits of lower inflation.
According to Kantar’s market research, grocery prices were 6.7% higher last month than they were a year ago. This is down from the 9.1% increase in November, and represents the lowest inflation rate since April 2022.
Sainsbury’s sales increased, but the company kept its pre-tax profit forecast unchanged. It was between £670 and £700 million. Roberts stated that they were “really pleased” to have raised their guidance in November to the top of the range. You’ll recall we did this after a particularly difficult summer, especially given the weather. “We are very confident with our guidance ranges for the remainder of the year.”
He said that the retailer will share an update on its strategy next month, “building on everything we’ve done over the past three years to put food at the core of Sainsbury’s”.