Sainsbury’s sees uncertain consumer outlook in ‘unprecedented times’

Sainsbury’s has added to fears over lacklustre consumer spending in the run up to Christmas, as it warned over an uncertain outlook amid “unprecedented times”.

The supermarket giant set the scene for a more difficult festive trading period as signs point to consumer retrenchment in the face of Brexit worries.

Retail chain Halfords also cautioned on Thursday that shoppers are holding back on spending on discretionary items.

Announcing half-year results, Sainsbury’s said: “The consumer outlook is uncertain as we head into our key trading period.”

The chain added its markets also continued to be “highly competitive and very promotional”.

The comments came as Sainsbury’s reported a 40% slump in bottom-line profits to £132 million for the six months to September 22 after a raft of costs, including store restructuring and expenses related to its planned £12 billion merger with Big Four rival Asda.

But on an underlying basis, pre-tax profits rose 20% to £302 million.

Sainsbury’s boss Mike Coupe said the group was facing “unprecedented times” as the country is left waiting for news of a Brexit deal with less than six months to go until the March 29 withdrawal date.

The latest report from the British Retail Consortium (BRC) earlier this week also revealed like-for-like retail sales edged just 0.1% higher in October, with the “all-important golden quarter” getting off to a fairly flat start.

The BRC said consumer caution was among factors seen dampening demand.

Mr Coupe said: “We have to strike a note of caution, because we are in unprecedented times in my experience.”

But he said the group was not bracing itself for a wash-out festive season.

“Consumers will trade up and they tend to come to Sainsbury’s more,” he said

Despite the caution, Sainsbury’s said it remained on track for full-year expectations, with analysts pencilling in underlying pre-tax profits of £634 million, up from £589 million in 2017-18.

Mr Coupe admitted the group had seen “bumpy” stock availability in its stores over the early summer period after controversial recent pay and contract changes for its 135,000 store staff and managers.

He said: “Particularly during the warm weather, availability was a challenge because people were buying certain items.”

He insisted availability had returned to normal levels and added that the chain was “very confident of our standards”.

He said the group continued to “engage constructively” with the competition watchdog amid an in-depth probe of its planned tie-up with Asda.

The Competition and Markets Authority (CMA) said in September that nearly 500 of the duo’s supermarkets overlap, following initial investigations into the merge.

It is considering whether the deal could lead to less choice, higher prices or worse quality services.

Mr Coupe said: “We remain confident in the case we are making to the CMA.

“It will result in lower prices for consumers.”

Sainsbury’s saw the summer heatwave boost sales over its second quarter, with like-for-like growth including Argos, but excluding fuel, accelerating to 1%, up from 0.2% in the previous three months.

This meant comparable store sales rose 0.6% overall in the half-year.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Argos is proving to be an ace up the sleeve for Sainsbury’s in a tough retail environment.”