Defiant Sainsbury’s aims to outperform big three rivals

SAINSBURY’S is confident it will outperform its three big rivals this year, despite reporting its second straight quarter of falling underlying sales in what it described as the toughest market conditions in a decade.
A model wearing a Zig Zag bikini by Tu Clothing, as a tough spring for Britain's supermarket giants was underlined when Sainsbury's posted lower underlying sales for a second quarter in a row.A model wearing a Zig Zag bikini by Tu Clothing, as a tough spring for Britain's supermarket giants was underlined when Sainsbury's posted lower underlying sales for a second quarter in a row.
A model wearing a Zig Zag bikini by Tu Clothing, as a tough spring for Britain's supermarket giants was underlined when Sainsbury's posted lower underlying sales for a second quarter in a row.

Outgoing chief executive Justin King said: “I’d have preferred sales to be growing, but I don’t think it’s leaving on a low.

​​“You deliver your performance in the context of a market. ​T​he market has been growing at the lowest level in 10 years. O​ur competitive position remains strong.”

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​Sainsbury’s, which is the UK’s third biggest retailer behind Tesco and Leeds-based Asda, reported a 1.1 per cent fall in like-for-like sales in the 12 weeks to June 7, its first quarter.

This was in the middle of analysts’ forecasts of a fall of ​0.5 to ​1.5 per cent and ​an improvement on the ​3.1 per cent ​fall in the previous quarter.

This followed nine ​years of ​unbroken sales growth.

Last week Tesco reported a 3.8 per cent fall in first-quarter like-for-like sales, its worst quarterly performance for 40 years and last month the fourth biggest player Bradford-based ​Morrisons posted a 7.1 per cent slump in first-quarter sales.

Asda is the only one to show modest growth with a ​0.1 per cent increase in its sales.

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​Kantar data last week showed that Asda is outperforming its big four rivals.

Its year-on-year market share ​rose​ 0.1 percentage points to 17.1 per cent, while Sainsbury’s slipped 0.2 points to 16.5 per cent.​

Mr King said he is confident Sainsbury’s will outperform rivals this year, helped by its fast-growing convenience store chain, its online business and its own-brand ranges.

Convenience stores showed the best growth​ with sales up 18 per cent over the three months.

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Grocery online sales showed growth of 10 per cent, down from highs of 16-19 per cent. Sainsbury’s said the slowdown in growth is in line with the rest of the market.

Asked what will be the growth areas in the future Mr King said he has high hopes for Sainsbury’s new online clothing range. With only a third of the country easily able to visit a Sainsbury’s store, he believes the group’s Tu brand which sits alongside the Gok Wan clothing range has great potential.

Sainsbury’s is keeping its forecast for underlying sales growth for the 2014-15 year similar to the 0.2 per cent it achieved in 2013-14 despite the 3.1 per cent fall in the first quarter and the 1.1 per cent fall in this quarter.

Its forecast is far more cheery than expectations for Tesco and Morrisons.

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Analyst Clive Black, at Shore Capital, said: “Sainsbury’s, which spars with Asda for the No.2 market position in the UK grocery market, has announced first quarter trading very much in line with our expectations.

“By Sainsbury’s own standards, like-for-like sales falling by 1.1 per cent is a disappointing outcome.

“However, against a backdrop of demonstrably weak industry sales, Sainsbury’s talked of the weakest quarter in a decade, the outcome is relatively sound when compared to Morrison’s 7.1 per cent fall and Tesco UK’s four per cent fall.”

Talking about the recent price cutting initiatives from its rivals, which are promising to slash prices in order to get nearer discounters Aldi and Lidl, Mr King said: “We’re playing our part in this price skirmish. We’re standing toe to toe with our competitors and our pricing has never been more competitive than it is today.”

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Mr King, who is credited with reviving Sainsbury’s fortunes during a decade at the helm, will be succeeded by commercial director Mike Coupe on July 9.

Mr Coupe, who has played a key role in Sainsbury’s success over the last 10 years, said he is confident the firm can avoid the turmoil that management change has caused at retailers such as Tesco.

HSBC analyst David McCarthy said: “Sainsbury’s may be feeling pleased it is beating its two quoted rivals in like-for-like sales, in that it is losing sales at a slower rate, but it is still losing like-for-like sales.”

Sainsbury’s core stores have seen declines of three to four per cent.

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