'It's Still Tough Out There': UK Supermarket Chief

Retailers are still facing “tough” times, according to Justin King, chief executive of Sainsbury’s, one of the UK’s largest supermarket chains.

Retail shoppers
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Retail shoppers

“It’s still tough out there,” King told CNBC in an interview Wednesday, after he announced like-for-like sales excluding fuel rose 1.9 percent in the 12 weeks to 11 June.“It’s not only difficult for us, it’s difficult for consumers. They’re more stretched than a year ago.”

Inditex, the Spanish owner of Zara which is the world’s largest clothing retailer, reported first-quarter profit growth that beat analysts’ estimates Wednesday after a substantial international expansion.

Net income in the three months ended April 30 rose to 332 million euros ($479 million) from 301 million euros a year earlier. Food and clothing prices have risen as the price of ingredients such as wheat and materials such as cotton has soared.

“Consumers are very realistic about the challenges they face,” King said. He added that Sainsbury own-label products had done particularly well as shoppers looked for more value.

“This is very much about the UK consumer,” Mark Tinker, global portfolio manager at Axa Framlington, told CNBC Wednesday.

“All of a sudden he has to buy the stuff he needs to buy rather than stuff he wants. His disposable income has been hit by taxes and commodity prices. This is not a space where you can just turn up and make money, it’s really hard work,” Tinker added.

Rival Tescoissued a muted outlook on Tuesday, when it announced overall like-for like sales fell by 0.1 per cent when the rise in UK Value Added Tax was stripped out.

The UK’s biggest supermarket said the consumer environment was "cautious" in the UK and still "constrained by weak demand, particularly in general merchandise."

Home Retail Group raised alarm over the state of the British high street last week, when it reported that sales from Argos stores open at least a year down almost 10 per cent in the 13 weeks to May 28.