Humdrum sales increase shows why Sainsbury’s needs ASDA – and the sooner the better

Retail Shopping center food grocery

Following today’s news (Wednesday 4 July) of Sainsbury’s Q1 FY2018/19 results,

Thomas Brereton, Retail Analyst at GlobalData, a leading data and analytics company, offers his view on the chains current challenges:

“While Sainsbury’s focuses on getting its pending merger with ASDA past the CMA for the end of 2019, day-to-day retail operations continue – and as the first quarter numbers show, performance is far from impressive. While all key metrics are at least positive, a 0.2% growth in retail like-for-like sales sits far behind the recent results of competitors Tesco (+2.1%) and Morrisons (+3.6%) over a comparable period.

‘‘Argos provided a slight silver lining, with performance better than expected following a poor general merchandise performance at the end of 2017. GM sales were up 1.7%, driven by a 12% boost in online sales and a 21% sales rise from its innovative `Fast Track’ option. Given Sainsbury’s relatively poor grocery results, the now 228 Argos stores within Sainsbury’s stores will be vital in keeping customers coming through the doors. And the recent integration of Sainsbury’s Tu clothing brand into Argos reflects how Sainsbury’s will continue to blur the product lines between fascias in order to reach an ideal sales mix – although how that will play out exactly after the merger remains to be seen.

‘‘But in truth Sainsbury’s grocery division runs the risk of losing its identity as the division between premium and price-focused grocers continues to widen. Competitors with a focus on quality, e.g. Waitrose and M&S, are placing customer experience over price reduction in order to retain their core consumer base, highlighted by Waitrose’s recent announcement to hire more `food ambassadors’ instore. And while Sainsbury’s £150m price investment this quarter will help to retain customers who continue to feel an economic pinch on income, it cannot muster the same low-price reputation that the discounters Aldi and Lidl are cultivating across the UK. In order to truly take on Tesco after the merger, it needs to firmly decide which side of the price-quality barrier it sits on.”

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