Sainsbury’s has seen a surge in sales thanks to their revamped line of summer foods.
The supermarket changed its line of convenience food, and also benefitted from a recent Argos takeover which turned out to be a profitable choice.
Strong Strategy for Summer
Sainsbury’s took a differentiated strategy which led to a fantastic performance, which has not been seen in several year. Sales for goods excluding fuel were up 2.3% year on year in the 16 weeks up to July 1. This was a big increase on the 0.3% surge from the previous period. With Easter coming later in the year, the store also launched 430 new and improved products during this quarter. That included more than 250 new summer items.
The stores kept lower prices on items such as strawberries and potatoes which tend to sell well in the summer, while also opening one new supermarket and 10 new smaller stores.
The sales were also boosted by the acquisition of Argos. The recent heatwave in the UK drove up the demand for cooling items such as fans and paddling pools. This pushed up fast track deliveries by 36% and product collection orders by 64%. June saw sales of 92,000 fans in Argos alone as temperatures soared to 33c.
Grocery sales were up by 3% despite the fact that inflation is also running at around 3%, suggesting a much better performance than at first glance. Those in sales and commercial jobs will understand this is a considerable increase.
With the inflation set to add an average of £133 to a family’s annual groceries bill, Sainsbury’s have been “working closely with our suppliers to keep prices down for our customers”, according to chief executive Mike Coupe.
They kept prices down on strawberries, Jersey Royal potatoes, and fuel. Milk and chicken breast fillets are also cheaper than they were 3 years ago, putting savings directly into customer baskets. Sales of non-food products rose 1%, and clothing sales rose by 7.2% - likely also a response to the changing weather.
While there are concerns about an upcoming spending squeeze, Coupe noted that there was “no change in customer behaviour” so far. However, he also added that when money gets tight, “supermarkets tend to do better as people stop eating out as much and start eating in a bit more”.
There have been rumours of a further takeover of convenience chain Nisa, though there are not yet any confirmations of this. Commenting, Coupe said: “We have lots of conversations with lots of people and they tend to be in private so we won't comment on speculation other than to say that Sainsbury’s is alive to opportunities.”
The talks are thought to be a reaction to the fact that Tesco recently bought out rival chain Booker, which could give Sainsbury’s a run for their money. However, as chief financial officer Kevin O’Byrne pointed out, “lots of these talks don't come off”.
Industry experts are not confident about the deal since Nisa may well be unable to hold on to their current deal with McColls, their biggest customer. If they cannot, this could be a death knell for the deal. There have also been rumours linking Sainsbury’s to Palmer & Harvey.
Whatever deal they end up making, it’s clear that this is an exciting time for food recruitment. Sainsbury’s have made it clear that they are not ready to accept Tesco’s domination of the grocery market lying down. Instead, they are taking the challenge right to the larger chain, and may well be making the Tesco executives lose a little sleep.