17th Jun 11
Sainsbury’s chief says UK consumer economy at 30-year low
by Natasha Redman
Tough trading: Sainsbury's boss say industry worst than ever
Tough trading: Sainsbury's boss say industry worst than ever
Sainsbury’s chief executive Justin King has said that the current consumer economy is the most difficult he has faced in the near-30 years he has been involved in the industry.
King, who joined the supermarket giant in 2004 following stints at Asda, Mars and Marks & Spencer, said that he has been in the grocery business for 28 years and it’s tougher now than it ever has been for consumers.
He said that soaring petrol prices have significantly reduced the weekly shopping budgets of people in the UK. He went on to explain that except for a small blip during last year’s election, consumer confidence has now been subdued for around three years. He also expects the tough economic environment to last for the remainder of the year.
King’s comments came as Sainbury’s announced sales growth over the first quarter which was below city forecasts. The retailer said that like-for-like sales during the 12 weeks to 11 June went up by 4.8pc, or 1.9pc when not taking fuel into account. Some analysts had forecast that the latter figure would be nearer 2.5pc.
Earlier in the week Sainsbury’s arch rival, Tesco, announces a quarterly decline in like-for-like sales of 0.1pc, excluding petrol and VAT. Shore Capital analyst Darren Shirley said that the like-for-like sales growth at Sainsbury’s was at 0.8pc when using the same metric.
Espirito Santo analyst Caroline Gulliver said that Sainbury’s first-quarter trading report shows growth of 1.9pc in like-for-like sales including VAT and excluding tax, which came in at lower than their forecast of 2.5pc. She said that the underlying picture remains subdued and that, furthermore, it confirms that Sainsbury’s, Tesco and Morrisons are performing as a pack.
King described the performance as solid and said that sales of the company’s non-food items – like clothes – are increasing at just below three times the rate which food sales are growing. He said that the group’s Basics range is currently the second-biggest brand within the “value market”, after having surpassed the Smart Price range at Asda. Sainsbury’s lies second behind Tesco and King says the supermarket has reaped the benefits as customers search for extra value when doing their weekly shop.
The chief executive referred to the present economic environment in the UK as a “continuation” of what began three years ago at the start of the credit crisis. He said that during that period customers’ behaviour changed significantly as their view did of the outlook.
Over the period, the group opened two new supermarkets, 13 convenience stores, one replacement and three extensions, adding 209,000 sq ft of space in total to its store estate. Sainsbury’s shares dropped 3.2 to 323.6p.
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