Sector movers: Grocers drop as investors try to gauge duration of price war

Grocery giant Sainsbury on Wednesday unveiled better-than-expected numbers on like-for-like sales for the third quarter.Those dropped by 1.7%, considerably less than the 3.2% drop which analysts had plugged into their spread-sheets.As Shore Capital emphasised in a research note e-mailed to clients, the supermarket operator is in a very difficult competitive situation, caught in the middle as it is between the market leader, Tesco, which is attempting to get its act together, while at the same time losing share to the growing premium retailers such as Marks&Spencer or Waitrose.The British Retail Consortium's (BRC) shop price index, which was released on the same day, revealed a twentieth consecutive monthly drop, of 1.7%. To take note of, the BRC highlighted how the cost savings arising from the recent bout of deflation had in effect been transferred to consumers by way of the discount war between grocers.Mike Watkins, Head of Retailer and Business Insight, Nielsen, said: "With little external pressure to move prices upwards and an uncertain level of consumer demand, retailers will be cautious about price increases, so we can expect a continuation of deflation for at least the first part of 2015."Confirming that outlook, Sainsbury chief Mike Coupe said the outlook for the rest of the financial year was "set to remain challenging". He added that fourth quarter sales were expected to slip further back, to the level seen in the first half, which saw the company's like-for-likes fall 2.1%.Sainsbury thus ended the day 2.13% lower, despite having started the day comfortably to the upside.Not lost on the market either, surely, was the fact that Tesco was set to publish its own trading statement on the following day, as were Morrison Supermarkets and Marks&Spencer.