Disappointing Sales for Sainsbury's

Sainsbury's posts disappointing results as the supermarket finalises the acquisition of Argos owner Home Retail Group

Adam Kindreich, CFA 29 September, 2016 | 10:42AM

Supermarket J Sainsbury (SBRY) reported a disappointing trading performance for second-quarter 2017, the 16-week period ended September 24. Same-store sales fell 1.1% excluding fuel, which shows no improvement on previous periods. The weakness in sales was brought about by price cuts, while volumes are growing. The figures contrast with the accelerating sales for rival supermarket Morrison's (MRW), which reported a couple of weeks ago.

The acquisition of Argos could distract management from other challenges

The price cuts mark a change in Sainsbury's’ commercial strategy, with the firm moving away from promotions towards an everyday low price strategy. In our experience, this is a good thing, as it usually helps improve a store's price perception among customers and reduces complexity in the supply chain and logistics. The decrease in promotions was also linked to Sainsbury's’ attempts to help customers eliminate food waste by ending almost all multi-buy promotions in stores.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Morrison (Wm) Supermarkets PLC183.60 GBX-0.24
Sainsbury (J) PLC216.50 GBX0.00
Tesco PLC227.80 GBX0.04

About Author

Adam Kindreich, CFA  is an equity analyst for Morningstar

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