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Sainsbury’s strategy to serve customers in the channel of their choice pays off, but food deflation proves a drag on overall sales

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Sainsbury’s says its focus on serving customers in the way that they want to buy is lifting online and convenience sales. Second quarter growth in online sales was relatively muted at 7% as competitors ran promotions to acquire new customers, but convenience store sales rose by 17%. The growth came against a backdrop in which falling food prices led to total sales for the 16 weeks to September 27 falling by 0.8%, excluding fuel. Like-for-like sales fell by 2.8%, excluding fuel, and 4.1% including fuel. In the first half, total retail sales fell by 1.4% and like-for-like sales by 2.1%.

Chief executive Mike Coupe said in a second quarter trading statement today that Sainsbury’s was seeing deflation in many areas of its food business in a “dynamic and fiercely competitive” market.

He said: “We are focused on serving customers in the channel of their choice. Our convenience business reached annualised sales of £2bn and continues to grow strongly, at around 17%. Groceries online grew by around 7%, impacted by a high level of competitor customer acquisition activity in the quarter.”

General merchandising and clothing sales continued to grow quickly and during the second quarter the supermarket launched an online clothing trial to some Midlands customers.

Coupe said that an “accelerated pace of change in the grocery market,” which includes promotions and falling food prices was likely to continue for “the foreseeable future”.

• Separately home shopping and education business Findel said it expected to report a first-half profit for the first time in six years at its interim results announcement in November. Sales at its largest business, online shopping company Express Gifts grew by 6% in the 26 weeks to September 26 as existing customers bought more. Findel said Express Gifts, which trades as Studio, Ace and Health and Home Shopping was well-placed in the lead up to Christmas.

Its other online business, Kitbag, the replica sports kit supplier, saw sales increase by 7% over a period that saw it manage onsite retail for the Ryder Cup. The company has also won the contract for the McClaren Formula 1 team.

However education sales were 5% behind the previous year amid uncertainty surrounding school budgets and the new curriculum.

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