British supermarket Sainsbury's has posted a sixth straight quarter of declining underlying sales. As David Pollard reports, a fierce price war and record deflation are hurting the industry.
It's good news for shoppers but a price war and record deflation in UK retail is claiming victims in the industry. The UK's third largest supermarket Sainsbury's is the latest. It's posted a sixth straight quarter of declining underlying sales. First quarter sales at stores open over a year fell 2.1 percent, and including fuel they were down 3.7 percent. Like its bigger rivals Tesco and Walmart's Asda, Sainsbury's is battling to win back ground lost to discounters Aldi and Lidl. And all of them are having to deal with record commodity-driven industry price deflation. Will Hobbs is from Barclays. SOUNDBITE (English) WILL HOBBS, HEAD OF INVESTMENT STRATEGY, EUROPE, BARCLAYS CAPITAL, SAYING: ''Deflation is certainly playing a big role within the UK food retail space, there's no doubt about that. But it does feel like we might be starting to look through to light at the end of the tunnel.'' Sainsbury's shares rose by nearly five percent after the results - they've fallen by a quarter over the past year. And there is cause for optimism. Its clothing sales and convenience stores are doing well. And it may take heart from UK retail sales which were up 1.1 percent in May. British consumer spending is also almost back to pre-crisis levels, suggesting shoppers may finally be ready to start spending like they used to.