The City roundup video: Supermarket price wars are back

Video: Jim Armitage provides a run-down of the day's major news from the City

A colleague moves trolleys in the car park of Sainsbury's new Kings Lynn supermarket. (Matthew Lloyd | Getty Images for Sainsbury's)

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Supermarket price wars stormed back to the top of the City’s Worry Agenda today as Sainsbury’s reported a 1.7 per cent decline in takings for the Christmas quarter. Sainsbury’s sold the same amount of stuff over the three months, but at significantly lower prices.

Chief executive Mike Coupe described it as the “toughest Christmas ever” – quite a claim just a few Christmasses since the greatest recession since the 1930s.

As we all know, the Tesco, Asda and Sainsbury’s of this world suffered massively in 2014 from the success of discounters Aldi and Lidl.

Sainsbury’s has been trying to compete with price cuts of its own – announcing cuts on another 700 products today. But you really have to wonder why it even bothers slashing its profit margins and potentially threatening its dividends to shareholders to fight a battle it just can’t win.

Surely it’s better off focusing on its sizeable convenience stores operation and keeping the quality up like Waitrose successfully does. What little room for optimism in today’s numbers there was came in news that shoppers were trading up to its posher Taste The Difference ranges.

In a race to the bottom on pricing, Sainsbury just doesn’t have the scale to win. If the far bigger Tesco finds it hard – and we get their numbers tomorrow – Sainsbury will only find it harder.

Those price wars are rippling out into the retail hinterland, too. Majestic Wine said Christmas sales were up only 1.1%. Hardly time to open the champagne.