Buoyant Sainsbury's dismisses Asda claims of cheaper prices

Sainsbury's made the claims yesterday as it announced its "best ever Christmas".

The supermarket chain, which has leapfrogged Leeds-based Asda to become the UK's second biggest grocery chain, is expected to be crowned the Christmas supermarket winner after it announced a 3.6 per cent increase in like-for-like festive sales.

The highly competitive supermarket sector is set to become even more cut-throat this year as the major grocery chains step up their price cuts and promotions to win over cash-strapped shoppers.

Yesterday it emerged that Sainsbury's has regained its position as the UK's second biggest grocer behind market leader Tesco.

Industry figures from researcher Kantar Worldpanel show Sainsbury's market share rose to 16.6 per cent from 16.3 per cent in the four weeks to December 26 while Asda's share dipped from 16.6 per cent to 16.5 per cent.

Sainsbury's chief executive Justin King said it was not the group's objective to become the number two player and the statistics simply reflected the fact that Tesco and Sainsbury's have added the most new square footage.

But he was not so laid-back about Asda's claims to be cheaper than its rivals.

"Asda are not 10 per cent cheaper," he said. "To my outrage the Asda initiative does not include bananas. We charge a lot less for Fairtrade bananas.

"Only one in 600 customers have ever used the Asda price checker. Many of the comparisons don't reflect the quality difference."

Asda hit back saying that out of 18 million customers, more than one million have used the price comparison website.

"Since the start of the year we have seen a sevenfold increase in shoppers checking their bills," said an Asda spokesman.

Asda's controversial new price checker promises to undercut its rivals by at least 10 per cent. If it fails to do this customers will be entitled to receive an Asda voucher making up the 10 per cent shortfall.

Unlike many of its rivals which have blamed the bad weather for poor sales, Sainsbury's dismissed the impact of the snow to report a 3.6 per cent like-for-like sales growth in the 14 weeks to January 8.

Mr King said: "The impact of the snow was about whether you did a good enough job preparing for it. We used 12,000 tonnes of salt in the run-up to Christmas. Those who have done better coped better with the snow."

Sainsbury's said that the week running up to Christmas saw transactions hit an all-time high of 24.5 million.

The group's performance was boosted by the inclusion of extension space which added 0.9 per cent and VAT, which added 0.8 per cent.

Along with the inclusion of an extra trading week, which added around 0.3 per cent, Sainsbury's like-for-like improvement was around 1.6 per cent.

Morrisons reported a 1.0 per cent like-for-like sales growth in the six weeks to January 2.

Sainsbury's said it was yet to see any sign of a North/South divide. Analysts have warned that Northerners will be hit more than Southerners by public sector job cuts.

"We are not seeing any material geographic effect," said Mr King. "There has been no North/South divide and we don't see any reason why there should be. Public sector job cuts will have more of an effect on the towns that are affected."

He added that the group is committed to its expansion plans for the North.

Sainsbury's has identified Yorkshire as a key target area for expansion and is currently sizing up a number of sites. Recent store openings include York, Sheffield and Haxby in North Yorkshire.

While it has a 20 per cent market share in the South, it has just an 11.3 per cent share of the Yorkshire market. Sainsbury's has said around 75 per cent of its new supermarkets will open in the North and West, creating thousands of jobs in Yorkshire.

Sainsbury's shares, which have risen ahead of the rest of the supermarket sector in the last year, closed down two per cent last night, a fall of 8.4p to 382p.

The stock has been inflated by continued speculation regarding the intentions of the Qatari Investment Authority, which holds a 27 per cent strategic stake in Sainsbury's.

Richard Hunter, of Hargreaves Lansdown, said: "The uncertainty surrounding the Qatari stake continues to be a positive (should a bid materialise) and a negative (should the stake be sold) in equal measure, which provides something of a conundrum for investors."

Charles Stanley retail analyst Sam Hart said: "Despite the challenging outlook for the consumer, we expect Sainsbury's to continue to make steady progress. A high proportion of sales are non-discretionary and therefore sales should be relatively resilient."

The festive big sellers

Sainsbury's top selling Christmas lines included Norfolk Black Woodland free-range turkeys, which increased sales by 30 per cent.

Sparkling wine was another favourite with customers with sales of Etienne Dumont Brut Champagne rising 20 per cent and Taste the Difference Prosecco Conegliano up by a massive 1,708 per cent.

Smoked salmon sales rose by 16 per cent and Taste the Difference Jumbo king prawns rose by five per cent.

The group sold over 10.6 million individual mince pies, an increase of 22 per cent.

It also sold one in every three copies of Shrek 4: Forever After bought in shops.