Gateway cuts prices to halt sales decline

GATEWAY, the supermarkets group, yesterday cut the prices of more than 1,000 lines and promised much bigger discounts on 25 everyday products in a bid to shed its image as one of Britain's most expensive grocers, writes Patrick Hosking.

Gateway, whose parent Isosceles is negotiating a refinancing with its banks, said it was prepared to lose gross margin in order to halt and preferably reverse its sharp declines in sales volumes.

David Simons, chairman and chief executive of Gateway, said some prices had been uncompetitive. The cuts were designed to bring them back to the mainstream. They would be introduced in 630 Gateway, Somerfield and David Greig stores.

In addition, prices would be cut drastically on 25 to 35 popular 'hero' lines at any one time. The promotion has kicked off with bananas down from 54p to 25p a pound, beef cut from pounds 2.78 to pounds 1.98 a pound and milk down from 95p to 79p for four pints.

The stock market - now less jittery about food price wars - took the news calmly. Most supermarket shares, which have fallen sharply over the past two months, closed higher.

Mr Simons said he was confident that the Isosceles refinancing would be clinched despite resistance from Chemical Bank, one of the lenders.

'I know Chemical pretty well. I have a high regard for them. They are rattling their sabres. They haven't said no, they haven't said yes. But I know them well enough to know that they will sign,' he said.

Earlier this month Gateway announced 200 job losses in its support office, which would yield annual savings of pounds 7m.