Sainsbury’s revenue drops as customers cut spending

Sales at UK supermarket chain J Sainsbury’s fell in the last quarter as household incomes were squeezed and customers slashed especially on big-ticket items such as tech and furniture. at their Argos chain.

Same-store sales, excluding fuel, fell 4% in the 16 weeks to June 25 compared with the same period a year earlier.

Analysts expect an average drop of more than 5% and Sainsbury’s share price 1.6% higher in Tuesday morning trading.

Grocery sales fell 2.4% over the period, partly reflecting strong comparative figures compared to last year when much of the UK was on lockdown for 5 weeks of the 16-week period.

However, the impact on commodities is generally larger. Sales at Argos, which Sainsbury’s acquired in 2016, fell 10.5% year-on-year in the 16 weeks to June 25, a fifth consecutive quarter of decline.

Chief Executive Officer Simon Roberts said the numbers were in line with expectations and the pace of decline at Argos corrected at the end of the quarter. “We’re keeping costs under control, we’re managing margins, and we’re delivering value to our customers,” he said.

Spending on technology and furniture through Argos has fallen, he added, reflecting a tightening in customer income.

There is also evidence of a decline in customer purchases for groceries, with increased sales of the economy’s private label and product lines where prices match those of discount company Aldi.

“The system now has a lot of pressure, higher commodity prices, higher fuel, labor, and fertilizer prices. . . This pressure has been in the system for some time, says Roberts, and is slowly building up.

He added that Sainsbury’s is bullish on individual items less than the market, and the impact of trading down cheaper lines means the price of the average basket is going up even less.

The trade is more flexible than many expect, but it still underperforms market leader Tesco, said Bernstein analyst William Woods. 1.5% off in same-store sales in the first quarter.

As is the case with smaller rival Wm Morrison, rising gasoline and diesel prices have helped boost sales. Including fuel, same-store sales rose 2.9% during the period.

Roberts said Sainsbury’s was “watching this very closely” but its fuel prices remained “really competitive”. Supermarkets have been accused of using the Ukraine war as a cover to increase fuel margins.

Sainsbury’s is also facing pressure from investors to become a truly living wage employer, but Roberts said the company cannot support a solution raised at the annual meeting on Thursday.

“I started my career on the store floor at [Marks and Spencer] in 1990 when I was earning £8,000 a year. I’ve never forgotten how hard it is to work there,” he said, pointing out that the company launched an annual salary review in response to the escalating cost of living and the increase in discounts for employees. Staff.

“But we should make decisions about what we pay our colleagues, what prices we charge our customers, and what we pay our shareholders,” he added, instead of delivering that decision to “a non-responsible third party”.

Employers with a living wage must apply for an annual increase calculated by the Living Wage Foundation and ensure that any third-party contractors working on their premises are paid adequate wages. real life.

The group also said Kevin Byrne, chief financial officer, will retire from the company in March 2023 and be replaced by Bláthnaid Bergin, currently chief commercial and retail finance officer.

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