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Sainsbury's sees 'challenging' outlook

Wednesday, January 07, 2015 - 01:38

Strong demand for premium foods and clothing helped British grocer J Sainsbury to beat Christmas sales forecasts. But as Hayley Platt reports it continued to lose market share to discounters and warned of another tough year for mainstream supermarkets.

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It was a case of break open the wine rather than pop the champagne for Sainsbury's. Although the British grocer reported better-than-expected third quarter sales, excluding fuel they were still down 1.7 percent compared to the same time last year. Sainsbury's chief Mike Coupe warned of a challenging year ahead. SOUNDBITE: Mike Coupe, CEO, Sainsbury's, saying (English): "The reality is that the industry has seen some extremely significant challenges in the last year, largely driven by falling food prices but also driven by the changing consumer behaviour, customers are shopping more frequently and when they shop they tend to buy less." Investors welcomed the improvement after a second-quarter drop of 2.8 percent. Shares initially rose 4 percent, before falling back. BGC Partner's Mike Ingram. SOUNDBITE: Mike Ingram, Market Strategist, BGC Partners, saying (English): "I think this is reflective of the fact that the outlook both for the fourth quarter and for the years ahead remain uncertain and of course Sainsbury's announced further price cuts just yesterday." Sainsbury's has outperformed its rivals for years thanks to it's focus on own brand products, quality food and convenience stores, along with its online business. But, just like rivals, Tesco, Asda and Morrisons, it's been hurt by the rise of the German discounters Aldi and Lydl. SOUNDBITE: Mike Ingram, Market Strategist, BGC Partners, saying (English): "The price war continues, margins remain under pressure and so the earnings outlook for the entire sector including Sainsbury's remains significantly uncertain." Sainsbury's said in November it would cut costs along with its dividend. It also plans to spend £150 million pounds lowering prices. But it can expect a fight back from the market leader Tesco which is next up to announce plans to revive its fortunes.