Sainsbury's sales drop amid 'challenging' conditions

Sainsbury's reported a drop in first quarter sales on Wednesday, with its general merchandise and clothing categories continuing to experience challenging market conditions.

Overall, like-for-like first quarter sales excluding fuel dropped by 1.6% over the 16 weeks ended 29 June, with sales from the general merchandise and clothing sectors falling by 3.1% and 4.5%, respectively, as they continued to experience challenging market conditions as poor weather conditions impacted demand in some seasonal categories.

The fall in overall sales was roughly in line with analysts' expectations and the accelerated fall compared to the 0.9% drop in the previous quarter.

Grocery sales also dropped, coming in 0.5% lower than last year's first quarter, but the supermarket giant said they improved relative to the market due to outperformance from its 'Taste the Difference' range.

Mike Coupe, chief executive, said: "Our premium Taste the Difference ranges are growing market share and we continue to improve customer service and availability. In a tough trading environment, we gained market share in key general merchandise categories and in clothing, where we are now the UK's fifth largest retailer by volume."

The FTSE 100-listed company also said it slashed prices on more than 1,000 own brand grocery items and waded further into the vegetarian and vegan markets with the release of 33 new plant-based lines, including the UK's first meat-free 'Ribz' and 'Vegbabs'.

Looking to the future, Sainsbury's, which celebrated its 150th birthday in May, warned that retail markets remain "highly competitive" and added that the consumer outlook continues to be uncertain.

Analysts at Peel Hunt said the first quarter results poor even when accounting for the tough comparatives caused by the good weather and World Cup last year.

"The outlook statement is downbeat - 'Retail markets remain highly competitive and promotional and the consumer outlook continues to be uncertain'. This continues the theme of weak LFL having reported -0.6% in Q4 and points to a tough market for the food producers," said a note from analysts.

Sainsbury's shares were down 1.45% at 196.60p at 0803 BST.