Crisis not yet over for the big four, says Sainsbury’s chief

UK’s biggest supermarkets have not yet reached the low point in the crisis caused by the rise of German discounters Aldi and Lidl, says Sainsbury’s, the country’s second biggest supermarket. Sainsbury’s and its “big four” British adversaries, Tesco, Wal-Mart’s Asda and Morrisons, have seen share, profits, and sales hit by a severe price war to stalk the loss of customers to the discounters and by the effect of merchandise led deflation.

Sainsbury’s Chief Executive Mike Coupe said regardless of the way that the big four food merchants have shut the price gap significantly to the discounters it hasn’t came to a tipping point where the movement of clients towards the discounters has either decreased or halted.  He added Sainsbury’s had contracted its price gap to just under 20 percent from around 38 percent an year ago.

Sainsbury’s has demonstrated more noteworthy resilience to rivalry from the discounters than its big four opponents yet has still persevered through seven straight quarters of declining underlying sales. The company reported an 18 percent descend in first-half profit, with its operating margin losing 39 basis points to 2.71 percent.

The Sainsbury’s chief said a more hopeful visualization would require a move far from the market’s deflationary spiral. Sainsbury’s shares are up 5 percent in the last year. The data released last month showed that Aldi and Lidl had accomplished 10 percent share of the total British grocery market.

According to Coupe, a Sainsbury’s veteran of 11 years who succeeded Justin King as CEO in July last year, this is a test between the grocery stores and the discounters is the greatest test that confronts their side of the business for a long time to come. He said it was sensible to expect net margins at the vast food merchants to return in the long run to around 3 percent.