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Supermarket battle to intensify as Sainsbury's eyes growth in region
SAINSBURY'S is planning to expand in Yorkshire and the North to take on rivals Asda and Morrisons as it cashes in on record trading.
The UK's third biggest grocer has raised 432m from shareholders to fund an ambitious expansion programme which includes opening 50 new stores over the next two years and extending 30-35 existing stores.
Its target is to expand beyond its south and east England heartlands into the North and Scotland.
The news came as the group announced record first quarter like-for-like sales of 7.8 per cent, beating market forecasts of 7.3 per cent.
Sainsbury's is growing considerably faster than the UK's biggest retailer Tesco, which announced a like-for-like first quarter sales increase of 4.3 per cent on Tuesday.
But it is still lagging behind Leeds-based Asda which announced growth of 8.4 per cent and Bradford-based Morrisons which saw growth of 8.2 per cent.
Sainsbury's chief executive Justin King said the group's market share is 10 per cent or less in over half the country so it has "a huge geographic opportunity".
Yorkshire is a key target area as Sainsbury's has only a 9.5 per cent market share in the region.
Sainsbury's told the Yorkshire Post it is looking at a number of options for new stores in Yorkshire and it is also working on a number of store extensions.
It will provide more detail once the various sites are approved.
"We hope that these will lead to hundreds of job opportunities being created across Yorkshire," said a spokesman.
Sainsbury's is keen to take advantage of the sharp fall in property prices which has resulted in a high number of brownfield schemes lying derelict despite the fact they have full planning permission.
Mr King said he was confident of getting planning approval for the expansion as developers are looking to sell land in the downturn and local authorities are keen for sites to be put to use.
Sainsbury's already has approval for around 50 store extensions and sees the opportunity to do about 200 in total.
The expansion will increase the competition with Tesco, Asda and Morrisons, which are also growing rapidly.
Sainsbury's hopes to expand selling space by 15 per cent over the next two years, up from its previous aim of 10 per cent.
Supermarkets are far outperforming other retailers in the current recession as shoppers eat out less and trade down to cheaper budget ranges.
Sainsbury's has seen sales of its budget 'basics' range increase by over 50 per cent year on year while celebrity chef Jamie Oliver's 'Feed your Family for a Fiver' promotions have hit the right chord with the retailer's shoppers.
The retailer has defied expectations that it would suffer from its mid-market position by taking custom from upmarket rivals like Marks & Spencer and holding onto more budget-focused shoppers.
Sainsbury said growth was broad-based with sales of its higher welfare Freedom Food ranges quadrupling and its TU clothing range recording its best ever quarter.
Sainsbury's said its expansion drive would boost sales in 2010-11, but would slightly pressure earnings this financial year and the next due to extra interest and pre-opening costs.
Shore Capital analyst Darren Shirley said it was slightly disappointing that it will be dilutive to earnings in the short term, but it should strengthen Sainsbury's position in the medium term.
"They're essentially doing what Tesco did ten years ago," he said, noting Sainsbury's plans to sell more non-food products. Around half of the new space will be for non-food lines.
Sainsbury's shares closed down 5.7 per cent, a drop of 18.75p, to 313p as the new shares were placed below Tuesday's closing price. The group declined to comment on whether the Qatar Investment Authority or the Sainsbury family – both major investors – had bought shares.
The 140-year-old firm has over 500 supermarkets and almost 300 convenience stores.
It announced more detail on the planned launch of a non-food website over the coming weeks, saying it would start with 8,000 products from kitchenware to furniture.
Happy Birthday year
Sainsbury's, which celebrates its 140th birthday this year, has had a good 2009 despite the recession. Highlights include:
January: Sainsbury's reported its best ever Christmas, with over 18 million customers a week and 22.6 million in the seven days before Christmas.
March: Sainsbury's bought 24 stores from the Co-operative Group for 83m.
April: Sainsbury's leap-frogged rivals to become the fastest growing of Britain's big four supermarket groups, helped by strong promotions and innovative campaigns.
May: Sainsbury's posted an 11 per cent rise in full-year profit to 543m and said it is speeding up expansion into convenience stores with plans to open 50 convenience stores in 2009-10 and 100 in 2010-2011.
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Friday 25 May 2012
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