Sainsbury’s like-for-like sales hit, but revenue rises

Sainsbury’s saw its like-for-likes sales fall by 1% in the first half of the year, despite rising total revenues across the group, in the first set of results that includes the newly acquired Home Retail Group and Argos businesses.

Revenues rose 2.1% to £13.9bn in the 28 weeks to 24 September 2016, but like-for-like sales were hit, falling 1%, it reported this morning.

Underlying profit before tax fell 10.1% to £277 million and CEO Mike Coupe said Sainsbury’s profit was likely to be lower in the second half of the year as a result of investment in price and increasing cost inflation.

Coupe noted that the market remained competitive and pricing pressures continue to impact margins, but said the retailer was delivering against its strategy and had a strong platform for growth. “The full impact of the devaluation of sterling on retail prices is as yet uncertain. However, we are well placed to navigate the external environment and remain focussed on delivering our strategy,” he said.

He added that customer satisfaction scores had continued to improve and the retailer had made good progress.

Convenience sales grew more than 6%, with the format contributing around £2.4 billion of annualised sales. Around 16 new c-stores were opened in the period, along with a further six franchises in service station.

Coupe also unveiled more details on the retailer’s plans to integrate the Argos business, including adding around 250 Argos digital stores in supermarkets over the next three years, with 30 Argos digital stores and 200 digital collection points set to be in supermarkets by Christmas. 

Analyst Darren Black at Shore Capital said there were few shocks or surprises in the results.

Earlier this week, the retailer announced it was bolstering its top team with the appointment of the CEO of Poundland, Kevin O’Byrne, as the new chief financial officer. It is also investing in its online offer, having opened a new Bromley fulfilment centre to cater for online grocery sales in London, as well as trialling a one-hour grocery-by-bike service, Chop Chop, across Central London.

Trading slipped in the first half of the year, with retail sales down 0.4% in the 16 weeks to 24 September, and KantarWorldpanel data also showed sales down 0.4% in the 12 weeks to 9 October, which it compared unfavourably to gains made by Tesco, Waitrose, The Coop and discounters Aldi and Lidl.