Sainsbury's reported a 10.5% increase in grocery sales in the first quarter of its financial year, with the retailer more than doubling its digital sales during the period.
Commenting on the group's performance, newly-appointed chief executive Simon Roberts said, “The coming weeks and months will continue to be challenging for our customers and our colleagues and we do not expect the current strong sales growth to continue."
Here's how leading industry analysts viewed the retailer's performance:
Thomas Brereton, GlobalData
"Sainsbury’s Q1 results are a pleasing read, with positives stemming largely from its ability to meet changing customer habits as a result of heavy digital investment over the past five years. Grocery sales grew 10.5%, buoyed by an 87% increase in online sales following a jump in orders fulfilled to 650k per week (over double that available in Q1 2019/20) as many shoppers took up home delivery in a bid to avoid physical stores.
"While impaired demand across apparel (where sales fell 26.7%), fuel and banking negatively impacted total sales growth, these declines are broadly in line with rival Tesco, and Sainsbury’s will be pleased that these sectors are not displaying obvious problems that will persist outside of the immediate impact of COVID-19.
"In fact, unlike much of the last two to three years, Sainsbury’s has a lot to be optimistic about when comparing themselves to competitors. For Sainsbury’s general merchandise arm Argos, its previous investment in website performance, fulfilment capabilities and the store-in-store concept has borne fruit, realising a sales increase of 10.7% (including home delivery at +78%) as shoppers raced to buy home-related equipment such as office furniture and indoor sports equipment."
Nigel Frith, www.asktraders.com
"Sainsbury’s reported a 8.2% rises in like-for-like sales, with online sales doubling during the period. A pretty impressive first set of numbers for new chief executive Simon Roberts.
"Investors have been trying to figure out whether COVID-19 has been net positive or negative for the supermarkets and today Sainsbury’s numbers helped fill in some of the gaps. The supermarket expects a £500 million hit to profits from COVID-19 to be balanced out government business rate relief and stronger grocery sales.
"The next few weeks and months will be key. Grocery sales are unlikely to continue growing at the current rate so Sainsbury will be looking for sales of general merchandise to start lifting. However, the with the UK heading for its deepest recession in 300 years, sales of non-essential items could be slow to pick up again."
Russ Mould, AJ Bell
“Sainsbury’s has pulled a rabbit out of the hat with a stellar showing from Argos. Expectations were already high for strong grocery sales, given stronger demand for food to eat at home during lockdown. However, it is fair to say that the market wasn’t expecting such a positive showing from Argos.
“The strong performance in all parts of the business apart from clothing and general merchandise inside its supermarkets will give Sainsbury’s a new lease of life. It’s also fortunate timing as it allows new chief executive Simon Roberts to deliver positive news with his debut appearance updating the market.
“It’s not all plain sailing as Sainsbury’s will have to stomach higher costs associated with COVID-19 and there is a high chance that consumer spending levels may drop in the coming months, particularly if unemployment rates go up."
James Anstead, Barclays
"Sainsbury has reported its 1Q sales performance, covering the 16 weeks to 27 June. The details can be seen in the table below, but Retail LFL was +8.2%, halfway between company-collected consensus of +7.6% and our forecast of +9.1%. Sainsbury was stronger in General Merchandise and Clothing than we expected, but was a little weaker in Grocery.
"It is not possible to make a very direct comparison with competitors because of differing reporting periods – and we note that the recent volatility in industry sales growth makes a fair comparison even more difficult than normal. However, for completeness we note that Morrison reported LFL sales contribution of +5.1% in the 14 weeks to 10 May and Tesco’s UK core business reported LFL sales growth of +8.7% in the 13 weeks to 30 May."
Clive Black, Shore Capital
"Simon Roberts’ premier announcement from Sainsbury’s Q1 FY2021 contains a welcome surprise and it is not from its Grocery division, where sales rose by 10.5%, ahead of our expectation of c8.0% incl., VAT, ex-fuel like-for-like (LFL) sales growth. Rather, it emerges from Argos, where 10.7% sales growth contributed to a 7.2% increase in General Merchandise sales, a material beat to our negative expectation, albeit we did highlight Argos as a label where we were uncertain as to trading momentum.
"Within and between the channels and categories, Sainsbury’s reveals further evidence of very good industry progress with respect to the online grocery channel development with orders rising from 370k per week to 650k+, leading to an 87% increase in online grocery revenue growth. We also note with interest that Sainsbury’s ‘SmartShop’ app reached 37%
participation, which is a notable figure. Digital growth in general has been very strong at JS, with a doubling of sales.
"Argos saw home delivery sales rise by 78% with click & collect activity 53% higher year-on-year whilst stores were closed; those outlets are now re-opening, with c275 expected to be trading by the end of July. Within low traffic in city centres, convenience stores (CVS) sales fell by 5%, reflecting the shift too in calorie intake to the suburbs, so helping superstores."
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
