By Ian Walker
LONDON--J Sainsbury PLC (SBRY.LN) Wednesday reported a 1.7% fall
in same-store sales, excluding fuel, for the 14 weeks ended Jan. 3,
which was above analysts' expectations, and said it is cutting the
price of 700 of its most popular items this week.
The U.K.'s number three supermarket chain by market share warned
that the rest of the year will remain challenging, with intense
competition in the grocery market and food deflation likely to
continue.
Sainsbury added that it expects fourth-quarter like-for-like
trading to be similar to the first half. For the first half year
ended Sept. 27, it reported like-for-like sales, including
value-added tax but excluding fuel, down 2.1%, and a loss before
tax of 290 million pounds ($450.43 million), compared with a profit
of GBP433 million a year earlier.
Analysts had expected Sainsbury to report a decline in
same-store sales, excluding fuel, of around 3% for the third
quarter, which includes the key Christmas period.
Sainsbury said at the time of its half-year earnings in November
that it would invest an additional GBP150 million to cut the price
of its products to compete with discount chains such as Aldi and
Lidl that are winning market share. Half of that sum will fall in
the second half of the retailer's financial year, hurting profit.
The remainder of the money will be invested in the first half of
fiscal 2016, it said at the time. Sainsbury therefore expects
profit for the second half to be lower than the first half.
The company didn't give sales or profit figures on
Wednesday.
For the year ending in March 2015, the consensus adjusted pretax
profit forecast, before one-off items, is GBP659 million, according
to the company's website.
The U.K.'s biggest supermarkets have been cutting prices to
compete against the discounters, whose much lower cost base is a
big advantage in a price war. Yet the big four continued to lose
market share during the same period, compared with significant
increases for Aldi and Lidl.
Tesco, the U.K.'s biggest supermarket by market share, is
expected to update investors on Thursday, and is forecast to report
a 2.5% fall in same-store sales in the six-week Christmas period.
Tesco needs to trim operating costs and sell non-core assets to
shore up its balance sheet and fund a strategic overhaul. Details
are expected to be announced Thursday, with analysts expecting the
retailer to announce price cuts.
According to the latest supermarket figures from December, Tesco
has a 29.1% market share, compared with Sainsbury's 16.5%. German
Discounters Aldi and Lidl have a joint share of 8.6%, while
Wal-Mart's Asda has 16.7%.
Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749
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