Sainsbury's Holiday Sales Fall as Cautious Consumers Hold Back
(Bloomberg) -- J Sainsbury Plc’s Christmas sales fell more than analysts expected as price-conscious U.K. shoppers turned to discounters for their turkey and stocking stuffers.
The supermarket chain became the second of the big four U.K. grocers to highlight consumer unease over the holiday season, with Wm Morrison Supermarkets Plc warning earlier this week that the political stalemate over Brexit was making shoppers rein in outlays.
“People have been extremely cautious in how they spend money,” Chief Executive Officer Mike Coupe said on a call Wednesday. “We think this cautiousness will continue at least during this period of uncertainty.”
The shares fell as much as 2.8 percent in early London trading.
In addition to the challenges of Brexit, Sainsbury faces rising competition from discounters Aldi and Lidl and a growing threat from Amazon.com Inc. Walmart Inc.’s Asda, which also appeals to budget-conscious consumers, posted the strongest growth among the big four U.K. grocers, Kantar Worldpanel said Tuesday. Tesco Plc reports sales on Thursday.
The downbeat report from Sainsbury underlines the grocer’s rationale for its planned acquisition of Asda. The U.K.’s No. 2 supermarket chain lacks the scale of market leader Tesco, giving it less clout in negotiations with suppliers. By adding Asda, it hopes to cut prices in order to compete better in an increasingly cost-focused market.
Coupe said Sainsbury remains confident that the deal will be approved. U.K. antitrust regulators are set to issue provisional findings by early February.
Sainsbury’s retail like-for-like sales excluding fuel fell 1.1 percent, more than analysts expected, in the holiday season. General merchandise sales declined by 2.3 percent and groceries were up 0.4 percent, also missing estimates.
Even as the chain faces rising economic uncertainty, Coupe warned that things could get worse if the U.K. leaves the European Union without an agreement.
“A no-deal Brexit would be hugely disruptive for the supply chains we operate and we would have to manage that on day-to-day basis,” he said. “No amount of stockpiling could mitigate that risk, simply because we or the country don’t have enough space to stockpile more than a couple of days’ worth.”
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