Sainsbury’s better for shoppers than shareholders

The grocer has proved the doubters wrong in the past, but if faces some daunting challenges

Sainsbury's sales are falling (PA)

How you view Sainsbury’s latest numbers very much depends on whether you consider your glass to be half full or half empty.

For the optimists there are reasons to be cheerful. The 1.1 per cent fall in sales at stores open at least a year (which excludes the contribution from new openings and fuel) for the 16 weeks ending 24 September was its second consecutive quarterly fall in sales.

But it could have been a lot worse at a time of falling food prices. Several analysts had expected worse. The numbers will be worse for others.

Then there is Argos, a recent Sainsbury’s acquisition. Chief executive Mike Coupe’s big strategic move is doing the business. It grew sales at a 2.3 per cent clip, thus proving there may have been method in his madness when he agreed the deal to buy the chain. What’s more, the company has yet to fully reap the benefits of integrating its new toy with the wider Sainsbury’s franchise.

Just wait until all those new Argos stores have opened up in Sainsbury’s outlets, and people start to take advantage of the ability to place orders online and collect them in store while picking up their groceries. That ought to encourage footfall.

But there is a bear case as well, and it is growling in the ears of Sainsbury-sceptics. German discounter Aldi has just announced plans to invest £300m in its stores, while cutting prices to the bone. Morrison's and Tesco are reviving themselves after long periods in the doldrums. Asda surely can’t stay down forever. Can it? Oh, and we’re probably going to hear something from Lidl before too long. When one of the German pair acts, the other is usually swift to react. Then there’s Amazon.

All that and Brexit. Supermarkets don’t have much pricing power. The devaluation of sterling is therefore likely to eat into their bottom line as the goods they import get more expensive.

Sainsbury’s aggressive move into general merchandise via Argos has provided it with some much-needed sales growth. But will that continue when the economic damage caused by Brexit starts to bite shoppers? It is open to question.

Regardless, the chain has suffered two years of falling profits. Stripping out the contribution from Argos, it will likely have to report a third at the end of this year.

The company benefits from a strong brand, and it perhaps gets a little more love from its customers than its rivals can count on, helped by the fact that it can usually be relied upon to provide a rather better service than they do.

It also has an effective management team, one willing to take risks, as the acquisition of Argos proves, one that has demonstrated an ability to prove the doubters wrong on repeated occasions.

But Sainsbury’s is still better for shoppers than it is for shareholders right now.