April 30, 2019 / 7:23 AM / 4 months ago

Sainsbury's poor trading heightens grief over Asda deal

LONDON (Reuters) - Sainsbury’s, reeling from last week’s decision by the regulator to block its takeover of rival Asda, was alone among Britain’s big four supermarket groups in seeing sales fall in the latest 12-week period, industry data showed on Tuesday.

FILE PHOTO: Workers unload a Sainsbury's home delivery van in central London, Britain, April 30, 2018. REUTERS/Toby Melville/File Photo

Sainsbury’s wanted to buy Walmart owned Asda to boost its scale and buying power, as well as to compete better with market leader Tesco and fast growing German-owned discounters Aldi and Lidl.

However, last Thursday the Competition and Markets Authority (CMA) thwarted the 7.3 billion pound deal, saying it would have seen prices rise, not fall, as Sainsbury’s and Asda had argued.

Sainsbury’s is due to publish full year results on Wednesday with Chief Executive Mike Coupe under pressure to reassure investors he has the plan to arrest the sales decline.

Despite the deal’s failure Coupe’s job is not under immediate threat.

“The chairman (Martin Scicluna) and the board are fully behind Mike,” said a Sainsbury’s spokeswoman.

Sainsbury’s shares were down 0.5 percent at 0853 GMT, extending losses over the last six months to 29 percent.

Market researcher Kantar said Sainsbury’s sales fell 1.2 percent in the 12 weeks to April 21 compared to the same period a year ago.

In contrast sales at Tesco, Asda and No. 4 Morrisons increased 1.0 percent, 0.3 percent and 0.6 percent respectively.

Kantar said all of the big four lost market share to German owned discounters Aldi and Lidl, whose sales rose 11.6 percent and 8.6 percent respectively, giving them a combined share of 13.6 percent.

Sainsbury’s did, however, reclaim its position as Britain’s No. 2 supermarket group by market share - a status it lost to Asda for the first time in four years in Kantar’s last data set.

Sainsbury argues that Kantar under-reads its general merchandise market share. This is because since acquiring Argos in 2016 Sainsbury has streamlined general merchandise ranges in its stores in favour of Argos ranges. However, Argos’ sales are not captured by Kantar.

INNOVATION

Kantar did highlight one bright spot for Sainsbury’s in the data - double-digit growth online which coincides with the launch of its first mobile-only payment store in central London this week, demonstrating its drive towards digital innovation.

The market researcher said total UK grocery sales rose 2 percent over the 12 week period, the fastest rate of growth the overall sector has experienced this year. It was boosted by warm weather over the Easter holiday period.

Grocery inflation was 1.4 percent over the period, Kantar said. Prices were rising fastest in markets such as cola, lamb and crisps, while falling in instant coffee, fresh sausages and nuts.

Reporting by James Davey; editing by Kate Holton and Jon Boyle

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