3Q19 Trading Update Sainsbury’s, the U.K.’s second-biggest grocery retailer, reported its trading update for 15 weeks ended January 5, 2019.

• Group comparable sales (ex fuel) weredown 1.1%, compared to a 1.0% rise in the previous quarter, and below the consensus estimate of 0.3% growth from StreetAccount.
• Total retail sales (ex fuel) were down 0.4% year over year, compared to 1.7% growth in the previous quarter. Management pointed to cautious consumer spending and reduced promotions around Black Friday.
• Total grocery sales grew 0.4% year over year, compared to 2.0% growth in the in previous quarter: The company grew online grocery sales 6.0% and convenience store sales 3.0% year over year.
• General merchandise sales (mainly Argos) declined 2.3% year over year, compared to 1.2% growth posted in the previous quarter.
• Clothing sales showed a sequential improvement with a decline of 0.2% year over year in 3Q19, compared to a 3.4% decline in the previous quarter.

Despite the declines, CEO Mike Coupe believes grocery was “solid,” general merchandise outperformed the market and that clothing “performed well” in the quarter. General merchandise sales grew “strongly” over the “key Christmas weeks” (unspecified) and outperformed the market over the quarter — but sales declined in the quarter due to cautious spending by consumers and the company’s decision to reduce promotional activity around Black Friday. Argos Fast Track offered customers “market-leading delivery,” helping its sales grow 8% in the quarter. Argos stores in Sainsbury’s supermarkets that have been open for more than one year grew like-for-like sales over 10%. Clothing saw strong full price sales growth. The company opened 23 Argos stores in Sainsbury’s supermarkets, bringing the total to 274. Six of the 23 stores replaced an existing Argos store, taking the total number of replacement stores to 99. On the management call, Coupe said that he suspects that there was a “sense of caution from customers” in the overall market and that they “downgraded either within the mix within each individual company or overall between companies.” He noted a slowdown in sales for the Sainsbury’s premium Taste the Difference brand and pointed to “an extremely cautious consumer backdrop.” Coupe claimed that the company has been improving its price position and therefore had less inflation in its business than its “mainstream competitors.” Outlook Management highlighted that retail markets are highly competitive and very promotional, and the consumer outlook remains uncertain. However, the company is focused on delivering its strategy — which includes enhancing its differentiated food proposition; growing general merchandise and clothing, and delivering synergies in nonfood categories; and continuing to reduce costs and maintaining balance-sheet strength. It is on track to achieve £200 million of cost savings this year.