Sainsbury’s like-for-likes dip over Christmas: What the analysts say

“These good results are down to almost the same six points as Morrisons – execution, quality, less vouchering, non-food, online and price.

“This is not to say it copied Morrisons, or vice versa, but that the supermarkets collectively may have found a formula to more effectively compete against the discounters.

“One area Sainsbury’s is adopting a very different strategy to Morrisons is that it is not closing supermarkets and is continuing to add space, although this was almost all in convenience, with 16 new openings.”

“These results are good, beating the outlook and previous quarter, but seems somewhat mundane following the Morrisons report. However, Sainsbury’s continues to make good progress on its strategy with even more focus in these results on how it can differentiate itself from the discounters.

“The focus will likely remain on the potential acquisition of Home Retail and how this changes the story for Sainsbury’s.” – Bruno Monteyne, Berstein

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“Sainsbury’s results will do nothing to convince shareholders to stump up cash for its proposed bid for Home Retail Group.

“While the takeover makes sense at a strategic level, these results show there are more pressing needs for investment.

“Not least of these is to fund a price war to defend and grow its market share. Asda has announced a further £500m price investment, on top of the £1bn revealed in November 2013, and other grocers will follow suit.

“In addition, shareholders will question the wisdom of investing £1bn in a takeover of the Home Retail Group when the immediate threat is from discounters.

“Sainsbury’s partnership with Netto in the north of England has proved to be a successful alliance in the war against Aldi and Lidl and shareholders are more likely to push for more resources directed to that front in the form of new store openings.” – Himanshu Pal, Kantar Retail

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“Despite showing some stabilisation in like-for-likes this festive trading is far worse than expected from Sainsbury’s. Its well-rounded positioning paid some dividends but sales growth was significantly squeezed by deflation and price competition.

“Worryingly, Sainsbury’s like-for-like trading lagged rival Morrisons, which has consistently been the weakest player of the sub-set in recent years.

“Non-food remains Sainsbury’s best-performing division in which general merchandise sales grew 5%, most likely driven by its improving kitchenwares offer. Its publicised attempt to acquire Home Retail Group will add further strength to this if successful.

“Sainsbury’s festive performance overall is very disappointing. It’s core food positioning is arguably better balanced than the rest of the big four. It is quick to highlight sales volume growth as evidence that its strategy is working, like its rivals.

“The reality though is that its product and price investments, together with its strong non-food trading, are currently not enough to fight the winds of food deflation and price competition.

“We still retain a positive view that Sainsbury’s brand values around affordable quality will eventually bear fruit, but its sales growth will take time to recover.” – George Scott, Conlumino

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“All the indicators are that Sainsbury’s is focussed on long-term strategic goals. Plans to leverage Argos sites for convenience store expansion and distribution and to fill supermarkets make sense for a grocer outperforming its competitors but under margin pressure.

“Sainsbury’s has a steady rein on promotions and maintained standards well through Christmas. Marketing was understated and subtle, suggestive of a new more sophisticated shopper tired of the brash hard sell.

“The Mog Christmas campaign may have touched hearts but it is a stretch to suggest that it was the driver of the sales. This we put down to a good run of great pricing with trustable products and the best own label range of any of the big four.” – Phil Dorrell, Retail Remedy

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“Sainsbury’s total sales growth in the third quarter has again narrowed the performance gap with Waitrose to under 1% from 6% last year, demonstrating how Sainsbury’s is investing in quality and service.

“Like its competitors, Sainsbury’s is matching others’ promotional activity and is also reducing vouchering and promotional participation helping to improve average item prices.

“No mention was made of deflationary trends, however both Sainsbury’s and Waitrose have managed their gross margin and costs well in a market with falling supermarket sales.” – Mike Dennis, Cantor Fitzgerald

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“Sainsbury’s update says nothing more about a bid for Home Retail Group, as management want to do all they can to buoy their own share price and wait to hear Home Retail’s defence tomorrow, via its Christmas trading update.

“The news is fine, with like-for-like sales only down by 0.4%, although it is all much as expected. Sainsbury’s said it reduced its level of vouchering and promotional participation year-on-year and expected like-for-like sales in the second half of the year to be better than the first. The supermarket added that food deflation and pressures on pricing would lead to the market remaining challenging for the foreseeable future.” – Nick Bubb, independent analyst