16th Jun 11
Sainsbury’s growth outstrips Tesco
by Paul Russell
In the race: Sainsbury's sales improved in royal wedding weekend
In the race: Sainsbury's sales improved in royal wedding weekend
Sainsbury’s has continued to fight through Britain’s economic depression, recording sales growth figures over the past three months which comfortably outperformed those of Tesco.
Despite not hitting analysts’ predictions, Sainsbury’s, the second-largest supermarket chain in Britain, is in a confident mood. It informed the City that it was positively impacted by families enjoying the unusually warm weather in April as well as celebrating the royal wedding.
The company said that sold almost 300 miles of bunting, 49,000 mugs and 159,000 flags. There was an increase of 29 per cent in hot cross buns and more champagne was sold than ever before Christmas.
The group’s like-for-like sales, excluding fuel, increased by 1.9 per cent over the 12 weeks leading up to 11 June, outstripping Tesco’s one per cent rise. Company insiders have stated that underlying sales (not taking fuel and VAT into account) were actually one per cent higher.
Justin King, the chief executive of Sainsbury’s, said that the consumer environment was tough but that Sainsbury’s seems to have not been affected as much by the impact of rising petrol prices, which was blamed by Tesco for its own poor performance. Sainsbury’s also revealed that the company’s three own label ranges – Taste the Difference, By Sainsbury’s and Basics – all experienced sales and volume growth in the period.
Stockbroker Hargreaves Lansdown’s head of UK equities Richard Hunter said that value food ranges by Sainsbury’s were becoming more important as customers concentrate more knowingly on their household budget.
Hundred Consulting business strategist Anna Smee said that many consumers were treating themselves to supermarkets’ top-of-the-range food instead of going to restaurants. She added that it would be some time until spending on entertainment activities away from home begins to pick up again.
Sainsbury’s has been growing its non-food products, an area where Tesco boasts a significant lead. Over recent months there has been a decline in demand for electrical items as shoppers cut back; however, Sainsbury’s reported that its clothing and general merchandise sales grew quicker than food.
This was another stronger performance than Tesco, where non-food sales declined by roughly five per cent. However, on the downside, it means that the company’s food sales grew at a rate below its overall average.
Morgan Stanley analyst Geoff Ruddell pointed out that non-food sales growth at Sainsbury’s is partly as a result of its programme to extend existing stores, and hinted that the speed may be slowing He said that in the company’s statement there was no mention that non-food sales are expanding at three times the rate of food, which in recent quarters is something Sainsbury’s has consistently said.
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