Sainsbury's sales fall as market to remain challenging for foreseeable future

17th Mar 2015 07:28

Sainsbury's posted a 1.9% fall in fourth-quarter like-for-like sales excluding fuel, not as bad as many had feared, but warned it expected the market to remain challenging for the foreseeable future.For the whole of 2014 the supermarket group's like-for-like sales were also down 1.9%, with total sales down 0.2% for the full year.This came after total sales fell 0.3% in the fourth quarter, an improvement from the 0.4% fall in the third but after a flat first half.The grocer expects the market to remain challenging for the foreseeable future, with food deflation and competitive pressures on pricing likely to persist for the rest of this calendar year.Having cut prices on over 1,100 items and simplified its promotional offers, this resulted in like-for-like transactions growing over the quarter.Chief executive Mike Coupe highlighted better growth in the multi-channel offering, with general merchandise and clothing businesses performing strongly, up more than 6% on last year.He said the convenience stores business grew 14% in the quarter, with 23 convenience stores opened.The online business saw order numbers increase by 14%, with plans to have 100 sites available for click-and-collect by the end of 2015.Sainsbury's Bank grew loan sales 21% and the company also announced the opening of Argos digital stores in ten supermarkets."We believe that the great value and quality of our products, combined with a strong focus on developing our multi-channel offer, will enable us to outperform our supermarket peers," Coupe concluded.Bryan Roberts, director for retail insights at grocery research specialist Kantar Retail, said the update contained no huge surprises in what was an increasingly difficult market."Mike Coupe's strategy definitely holds water and we hope that the City, which increasingly resembles the Premiership in terms of short-termism and impatience, is able to take a longer-term perspective and not expect miracles in times of such turbulence.""While more minor irritants like Aldi and Lidl continue to nibble at Sainsbury's, the more ominous threat will be a sustained, meaningful recovery from Tesco. Recent Worldpanel data show that Tesco might be exiting hibernation, and Coupe will need to be agile to fend off the resumption of heavy bombardment from Cheshunt."Clive Black at broker Shore Capital said the out-turn is better than he feared, leaving his forecasts for the 2015 full year unchanged at £655m pre-tax profit and 24.7p earnings per share."Future year performance has, effectively, been guided lower for the next year or two by Sainsbury's management through its very realistic guidance provided last autumn, guidance that included an increase in dividend cover to 2.0 times."Accordingly, with EPS expected to fall over the next couple of years, Sainsbury's income stream is also expected to slip backwards; Shore Capital forecasts a FY2015 dividend yield of 4.8%, which we concede is still handsome, falling to 3.7% by FY2017."