Sainsbury’s is pushing forward with aggressive price strategies and is stealing market share from competitors as volumes rise.
Sainsbury’s has implemented a ‘Food First’ strategy to match prices with budget competitors Aldi and Lidl. Their efforts are paying off, with group like-for-like sales excluding fuel rising by 9.8%. Grocery sales were 11% higher in the first quarter.
The supermarket noted food prices were starting to fall, and they were passing these savings on to customers by cutting prices on over 120 everyday items since March.
“If the overall value of a supermarket’s sales were not going up at a time of rampant food inflation, something would be seriously wrong, but what’s more telling in the latest update from Sainsbury’s is news of an increase in volumes,” said AJ Bell investment director Russ Mould.
“Under Simon Roberts, who took over the business a little more than three years ago, there has been a renewed focus on its core food retail operation and this seems to be paying off. The market positioning of Sainsbury’s means it could be taking some business away from the more premium-priced Waitrose and Marks & Spencer, helping to compensate for any market share lost to the German discounters Aldi and Lidl.
“The company is also benefitting from its deliberate push to use its Nectar loyalty scheme to offer keener prices to repeat customers, cribbing the idea from its main rival, Tesco.”
Sainsbury’s maintained their outlook and guided for an underlying profit before tax of between £640 million and £700 million in the full year.
Sainsbury’s shares were down 1.8% at the time of writing.