Sainsbury's posts 0.8% sales fall on '˜challenging' trading

Britain’s second biggest supermarket reported a 0.8% drop in like-for-like sales excluding fuel for the 12 weeks to June 4.

The fall marks a setback after a return to quarterly like-for-like growth for the first time in more than two years the previous three months, when sales edged 0.1% higher.

CEO Mike Coupe said market conditions remain “challenging”.

“Food price deflation continues to impact our sales and pressures on pricing mean the market will remain competitive for the foreseeable future.”

Sainsbury’s recently began scrapping multi-buy promotions and has ditched its brand-match guarantee in favour of overall lower prices.

The first quarter update comes as the group’s £1.4 billion takeover of Argos owner Home Retail Group faces scrutiny from the competition watchdog.

The Competition and Markets Authority (CMA) said last month it was looking into whether the tie-up with Argos owner Home Retail could result in a “substantial lessening of competition”.

It will consider comments on the deal and decide whether to launch an inquiry by July 25.

Mr Coupe said he was “as confident as we can be” that the Home Retail deal will be cleared in the CMA’s initial inquiry, with the group adding that it remains on track to complete the takeover in the third quarter.

He insisted the group’s decision to end multi-buy deals was not denting trade, with the number of customer transactions up on a like-for-like basis.

He admitted the decline in first-quarter sales was a “slight step back”, but said the chain would stick to its strategy and continue to lower everyday prices.

The group has slashed prices on staple items such as whole chickens, free range eggs and cheddar cheese in response to customer feedback.

It now has around 23% of goods on promotion, down from more than 30% a year ago.

Mr Coupe gave hope of an easing in the food price deflation that has been hitting the sector hard, saying it is now running at around minus 1% against falls of up to 2.5% last year.

But Sainsbury’s believes food price deflation will continue until at least the autumn.