High Street crisis as sales plummet: Sainsbury's and Next hit as price war takes its toll 

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Two of the High Street’s biggest names saw their sales suffer as shoppers opted to splurge on holidays and cars rather than spend in stores.

Sainsbury’s profits tumbled nearly 14 per cent to £587million for the year to March 12 and sales fell 1.1 per cent to £25.8billion as it lost ground in the supermarket price war.

And clothing chain Next revealed sales tumbled 4.7 per cent in its first quarter, claiming a cold spring deterred shoppers.

Sainsbury’s has been one of the better performing of the big four supermarkets in the face of competition from German discounters Aldi and Lidl, but cutting prices has hit its profits.

Struggling: Sainsbury's profits tumbled nearly 14 per cent to £587m for the year to March 12 and clothing chain Next revealed sales in its stores tumbled 4.7 per cent 

It reported a second straight year of declining profit after investing in lower prices, chopping food by 4 per cent in the past year. 

It is on track to deliver a three-year £500million cost-saving programme, which will complete by the end of 2017-18.

But grocers are moving away from endless promotions to offer everyday low prices more in line with the likes of Aldi and Lidl.

Traditional retailers have been threatened by the rise of online groups, including Amazon, which is expected to launch a food business in the UK this year, and discounters such as Poundland and B&M Bargains.

Despite this competition there is a trend for shoppers to spend less than they did previously on their supermarket shop. 

This is partly to do with a crackdown on waste and partly because people are spending on other things. 

Sainsbury’s chief executive, Mike Coupe, said there had been a 15 per cent rise in household disposable incomes in the UK in the past few years.

But he added: ‘This is not finding its way into the grocery sector. People are spending it on holidays and buying bigger and better cars.’

In an attempt to compete, Sainsbury’s has increased its online operations and has made a £1.4bn offer to buy Argos to bolster its delivery capabilities. 

It has also expanded its convenience shops and now has 773 generating £2.3billion in turnover, but sales growth and the expansion of these stores has now slowed.

The supermarket chain has also been expanding its clothing business, which grew by 8.5 per cent in the year to reach sales of nearly £1billion.

It is now the sixth largest clothing retailer in the UK, and has overtaken Matalan.

The success of supermarket clothing has been a further drain on traditional clothing retailers such as Marks & Spencer and Next.

Full-price sales at Next fell by 0.9pc for the quarter from January 31 to May 2. They were dragged down by poor sales in stores, but sales in its directory business – its catalogue and online business – rose by 4.2 per cent. Next cut its sales guidance for the full year for the second time in two months.

Chief executive Lord Wolfson warned in March that shoppers are not buying new clothes.

Jasper Lawler, market analyst at CMC Markets, said Next shares rose yesterday despite the figures because ‘Lord Wolfson had previously suggested there was a shift away from spending on clothing towards travel and leisure but had conceded the weak recent results could just be weather related’.

Next shares rose 3.5 per cent, or 172p, to 5150p.

Sainsbury’s reduced its final dividend by 1.2 per cent to 8.1p and its full-year dividend was cut by 8.3 per cent to 12.1p. Its shares slid 6.3 per cent, or 17.9p, to 267.8p.