Sainsbury’s says its ‘clearer’ price message has helped to boost profits

Sainsbury’s chief executive Mike Coupe has praised the supermarket’s approach to lowering prices and communicating those changes to customers as it ups its profit forecast for the year.

Although Sainsbury’s like-for-like sales fell 1.1% for its second quarter – the 16 weeks ending 26 September 2015 – this was ahead of analyst forecasts of a 1.3% decline and a 2.1% drop in the previous quarter.

Coupe said its full-year underlying profits will be £528m, “moderately ahead” of analyst expectations of £546m.

“Our customers are telling us that we are communicating our prices and promotions more clearly which, in combination with the price reductions we have made, has seen an increase in price satisfaction scores,” says Coupe.

“Whilst the market is clearly still challenging, with food deflation impacting many categories, we are making good progress on delivering our strategy.”

Over recent months, Sainsbury’s has committed to lowering the prices of everyday essentials as it entered the supermarket price wars and it recently lowered milk prices to match Aldi and Lidl.

This follows a long-term strategy to simplify its promotions and communication of value after an internal review found that customers found in-store pricing “too complicated.”

Coupe, meanwhile, also credited the retailer’s improved Q2 performance on enhancing the quality of 3,000 own-label products, with volume sales of its Taste The Difference premium range up 4%, as well as a 13% growth in clothing sales.

Is Sainsbury’s lacking a unique identity?

However despite Coupe’s insistence that customers were happy with Sainsbury’s price-led communications, Retail Remedy’s Paul Thomas isn’t convinced and says it is lacking a unique identity.

Sainsbury’s has recently pushed a multichannel campaign talking up everyday twists to evening meals, with advice such as adding a spoonful of honey to a stir-fry or instant coffee to Bolognese sauce, but has strayed away from any significant above the line activity.

For the first half of 2015, its ad spend fell 4% year-on-year according to Nielsen.

Thomas explained: “Once famed for its ‘try something new’ campaign, what is new now? Adding a teaspoon of instant coffee to a Bolognese sauce just isn’t enough.”

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