Sainsbury's revealed lower underlying sales for a second quarter in a row, as Britain's supermarket giants continue to suffer a tough spring, but is enjoying better results than its troubled rival Tesco.
Sainsbury's boss Justin King, who is leaving the chain next month after a decade at the helm, said that consumers were continuing to spend cautiously, as the supermarket revealed that like-for-like sales, excluding fuel, had slid 1.1% in the 12 weeks to June 7.
King said: "We expect customer spending to remain cautious and we will continue to invest to keep our offer competitive to help customers balance their household budget."
By contrast, Tesco was rocked after suffering a 3.7% slide in like-for-like sales, leading former chief executive Sir Terry Leahy to admit he was "disappointed" with the results.
Six Reasons Tesco's Dominance May Be Finished
Tesco can't shrug off its poor performance(01 of06)
Open Image ModalClarke blamed the dip in sales on cutting prices, moving away from vouchers and the disruption from refurbishing a large number of stores.However, Bernstein Research's Bruno Monteyne estimates that if you took out such costs, their like-for-like sales would still have dipped by 2%.
Tesco is trying too hard to appeal to everyone (02 of06)
Open Image ModalDiscount retailers like Asda specialise in offering good deals, while fancy supermarkets like Waitrose are without equal at providing luxury. So Tesco is trying to be a mix of everything, other customers are lured away by more specialised rivals.
Others are doing what Tesco is trying, but better(03 of06)
Open Image ModalTesco "has been increasing prices way too fast over the last few years to keep up earnings growth," Monteyne points out.As a result, compared to discount retailers like Asda, Tesco is at least 4% more expensive for shoppers.
1 million fewer customers are visiting a week(04 of06)
Open Image ModalThe proof that Tesco is having some issues comes in the footfall, as the chain seems to have lost more than 1 million customer visits a week, worth £25 million in sales.
Tesco has never done this badly (05 of06)
Open Image ModalClarke, who has worked for 40 years at Tesco, admitted: “I have never seen a quarter’s like-for-like sales like this before, that I can remember."Monteyne told Radio 5 Live the results were "the worst in their history."
Even Tesco's boss isn't confident (06 of06)
Open Image Modal“I see every day the improvements that are coming in the business, but I’m not making any promises about sales improving in the next few quarters," Clarke warned today. Meanwhile, other analysts like Julie Palmer at Begbies Traynor think Clarke "doesn't seem to have a clear turnaround strategy". He'll have to work hard to prove them wrong.
All four supermarket giants have found themselves under pressure due to the rapid growth of German discount chains Aldi and Lidl, which have enjoyed an increasing share of the market.
Aldi saw its market share rise from 3.4% to 4.6%, while Lidl saw a "record-breaking month" that left it accounting for 3.4% of the market, according to research firm Kantar Worldpanel.
In the previous quarter, Sainsbury's suffered a like-for-like sales drop of 3.1%, marking its first decline in nine years, capping off growth of 0.2% across the financial year.
King said at the time: "The market is now growing at its slowest rate since 2005, with falling food inflation in particular benefiting customers."
He added: "Although some economic indicators are showing an improvement in the health of the economy, we expect the outlook for customers to continue to be challenging for the coming year."