Chief executive Justin King claims Sainsbury’s will emerge from key festive season as ‘clear winner’ despite slowing growth
Sainsbury’s, Britain’s third largest supermarket, has boasted it will emerge from the Christmas trading season as the “clear winner” even though its growth slowed during the festive selling frenzy.
The company unveiled its 32nd consecutive quarter of underlying sales growth as it posted a 0.9% growth in sales for stores open more than a year, excluding fuel. However, there was evidence of a frugal Christmas spirit within the figures as the chain revealed that cheaper own-brand products had grown in popularity. The performance for the 14 weeks to 5 January also represented a dip on the previous quarter, which saw growth of 1.9%.
The chief executive, Justin King, said: “We are very content with 0.9%. When the reporting season is over we’ll emerge clearly as the winner.”
Sainsbury’s figures are far better than those of rival Morrisons, which was hit by its lack of a home delivery service and limited number of convenience stores, suffering a 2.5% drop in its festive sales.
King said that Sainsbury’s slowing growth was explained partly by tough comparisons with a strong Christmas last year. He added: “Tesco had a very significant decline in 2011. It sounds like there is some positive response this year. For Morrisons it is the opposite.”
Figures from market researchers Kantar Worldpanel revealed that Sainsbury’s was the only big player that managed to boost market share compared with the previous year, inching up by 0.1% to 17.1%. It is, however, still trailing Tesco, which dominates the field with 30.5% of the market.
Despite King’s bullish outlook, Sainsbury’s admitted that its underlying sales growth slipped to 0.4% once the impact of store extensions was stripped out, while the figures were boosted by price inflation running at 3%. It indicates that Sainsbury’s saw a decline in the volume of goods sold as shoppers stuck to frugal budgets because their disposable income remains under pressure. The supermarket said shoppers were also cutting their weekly spend by switching to its cheaper own-label products from more expensive international brands.
King dismissed speculation he may be looking to move on after nine years leading the grocer, stating that he saw himself remaining at Sainsbury’s “for the long term”. He added: “The week before Christmas was our strongest trading week ever, with customer transactions exceeding 27m. We saw a record-breaking £16m of sales in one hour between 12pm and 1pm on Sunday 23 December and experienced our best ever Christmas Eve, at both our supermarket and convenience stores, with over £100m of sales.” .
Britain’s major grocers are finding the going tough, despite their focus on essential goods, as cash-strapped shoppers spend less and switch to low-cost discount stores such as Aldi and Lidl or look for luxury at the likes of Waitrose.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said Sainsbury’s had “thrown down the gauntlet to Tesco” ahead of the trading update from Britain’s biggest retailer on Thursday.
“Record customer visitors in the lead-up to Christmas were accompanied by strong double-digit percentage growth in both the convenience and online channels, where the company is already well established,” said Hunter. “On the downside, Tesco’s determination to bounce back is palpable – if yet unproven – whilst the company has suffered a slight downturn compared to the Olympics-led previous quarter. The quest for the cost-conscious consumer remains intense, although at the current time Sainsbury’s is holding its own.”