Increasing competition in the supermarket sector has taken its toll on Sainsbury's as the retailer reported "very poor" second quarter results.
The company reported a 2.8 per cent drop in like-for-like sales, excluding fuel sales, while total sales had also dropped by 4.1 per cent in the 16 weeks to September 27th. The results highlights a rise in competitiveness in the retail sector driven by the growing prominence of discounters such as Aldi and Lidl.
Both grocery stores have been performing strongly in recent months. In the past week, Aldi announced a huge rise in its full-year profits, with a 65.2 per cent rise to £260.9 million for the year to December 31st, 2013. This included a 35.7 per cent increase in turnover to £5.27 billion and a boosted market share to 3.1 per cent, according to figures released by Kantar Worldpanel.
This positive performance from the discounters has piled pressure on to the more traditional supermarkets. While Asda and Morrisons have made redundancies over the past year, Tesco was recently embroiled in a scandal after it overstated its guidance for its half-year profits by £250 million.
Sainsbury's is the latest to report a drop in sales. Mike Coupe, chief executive of the supermarket, explained that "deflation in many areas of our business" was down to increased short-term competition. He highlighted Sainsbury's need to lower prices on essential food items in a bid to compete with the likes of Asda as well as Lidl and Aldi.
Speaking to BBC Radio 4's Today programme, Mr Coupe said: "Customers are shopping very differently to the way they were shopping even a year ago.
"So we are seeing an increase in the number of outlets available to them and they are shopping much more frequently and little and often shopping so these trends are changing very rapidly."