Sainsbury’s nine-year run of sales growth ends

British grocer J Sainsbury’s nine-year run of quarterly sales growth has come to an end, underlining the pressure on the industry as a battle over prices intensifies in a fragile economic recovery.

Britain’s grocery market is growing at its slowest rate since 2005 due to falling food price inflation and as subdued wages growth keeps consumer spending in check.

The "big four" grocers - market leader Tesco, Wal-Mart's Asda, Sainsbury's and Wm Morrison - are all being outpaced by sales growth at discounters Aldi and Lidl, while upmarket chains Waitrose and Marks & Spencer are also gaining share.

Last week supermarket group Morrisons posted its lowest annual profit for five years, issued a huge profit warning and sparked fears of an industry price war after saying it would invest £1 billion in price cuts over three years to win back customers from discounters.

Its statement, which followed price cutting moves from Tesco and Asda, wiped over £2 billion off the stock market value of UK grocery retailers.

Sainsbury’s said it would ensure its prices remained competitive and had already dropped them for milk, bread and eggs in response to rivals’ recent moves.

“If and when we see that activity come forward we will match the prices, we will maintain our price position as we always have done,” commercial director Mike Coupe, who will succeed Justin King as chief executive in July, told reporters.

Shares in Sainsbury’s, down 21 per cent over the last six months, were up 0.6 per cent to 313.4 pence at 1135 GMT, valuing the business at about £5.9 billion.

“Whilst it is not losing out (to the discounters) to the same extent as its peers, we do not believe that Sainsbury’s is blind to the challenge,” said Shore Capital analyst Clive Black.

Reuters