Sainsbury’s predicts ‘significantly weaker’ sales for rest of 2020.
Supermarket warns tapering off of Govt. support will lead shoppers to reduce grocery spends.
Sainsbury’s has predicted ‘significantly weaker sales trends’ for the rest of 2020 following a reported 10.5% rise in grocery sales over the lockdown period.
Despite the positive overall results for the last quarter, the supermarket’s ‘most profitable channel’ of Sainsbury’s Local stores struggled. Strong sales in neighbourhood stores were wiped out by 26 temporary closures and falling footfall across its city centre and transport hub convenience sites, leading to a 5% sales decline.
Sainsbury’s said that though delivered sales had risen dramatically, up 87%, this represented its ‘least profitable channel’ and suggested lower basket spends from the vulnerable customers it provided delivery slots to, and cannibalisation of former in-store shoppers had further dented its profitability. There were signs that demand for deliveries continued to rise. May delivered sales were up 128%, rising to 136% in June.
Like its rivals, chief financial officer Kevin O’Byrne warned investors that reduced Government financial support in the second half of the year would lead consumers to tighten their belts. “Consumers will be focused on value and feeding their family for less and we have plans to meet that.” O’Byrne said Sainsbury’s had now ‘locked in’ prices on 1,200 lines and had ‘a whole package of measures’ prepared to provide a value proposition amid an expected battle with the discounters. “We expect discounters to react and we are live to that, hence we are cautious about the second half,” he explained.
Sainsbury’s also reported strong sales in its general merchandise sales, up 10.7% including Argos, with O’Byrne highlighting potential areas of continued opportunity. “there’s been strong demand for gaming and toys. With home office supplies and home grooming as soon as it is in, it sells,” he revealed.
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