Grocer to continue push for bigger say in North

Sainsbury’s is keen to branch out beyond its Southern heartlands to areas in the North where it has just a 10 to 15 per cent share of the market.

It will open a new store in Whitby this August and has plans to open 10 convenience stores across the region with the first three opening in Sheffield, Leeds and Headingley. It will also extend its Pocklington store this year.

Number three player Sainsbury’s will follow market leader Tesco in slowing down its expansion programme.

Sainsbury’s said it plans to return to space growth of around five per cent a year, down from seven per cent last year.

Last year it opened two new supermarkets in Wakefield, extended its Halifax store and opened four new convenience stores – two in Leeds and two in Sheffield.

Sainsbury’s is planning gross space growth of one million square feet, compared with 1.4 million square feet in the last year.

Chief executive Justin King said: “That will be the fourth biggest year of footage growth Sainsbury’s has ever had. It just so happens that the three biggest years were the last three.”

The group has added 22 per cent to space over the last three years.

Analysts welcomed the reduction in new space.

“This signals the end of the space race,” said Panmure Gordon analyst Philip Dorgan.

“Focus across the sector will now shift to increasing shareholder returns, which is good news for share prices.”

Sainsbury’s reported annual profits at the top end of forecasts yesterday as cash-strapped shoppers switched to Sainsbury’s own brand and shopped more frequently and more locally to reduce total spend, waste and petrol miles.

The group, which has 35 supermarkets and 89 convenience stores in Yorkshire, reported a seven per cent rise in underlying pre-tax profits to £712m for the year to March 17, better than expectations of £700m.

Sales rose 6.8 per cent to £24.5bn and the dividend was increased 6.6 per cent to 16.1p.

Like-for-like sales, including VAT and excluding fuel, rose 2.1 per cent and around 1.1 per cent of this growth came from extensions.

Sainsbury’s has outperformed Tesco of late thanks to the popularity of its ‘basics’ range which saw growth of 6.8 per cent in the year to March 17.

It is half-way through the relaunch of its core ‘by Sainsbury’s’ own label range.

Sainsbury’s said that its customers are budgeting in some areas in order to splash out on treats in others.

The group’s upmarket ‘Taste the Difference’ range saw growth of 8.2 per cent over the year and Mr King said it is normal for a shopping basket to contain both ‘basics’ items and ‘Taste the Difference’ goods.

This cutting back in order to splash out is expected to be mirrored by shoppers’ approach to the big events coming up this summer – the Diamond Jubilee, the Euro 2012 football championship, the Olympics and the Paralympics, for which Sainsbury’s is an official partner.

“Customers are making sure they can enjoy special occasions,” said Mr King. “They are holding back on spending outside these periods and battening down the hatches.

“There are more reasons for customers to celebrate this year. The Jubilee and the Paralympics are catching customers’ imagination. This will be a year like no other. They are real reasons to be cheerful and hopefully they will lift the national mood,” he added.

Sainsbury’s hailed its ‘Brand Match’ promotion, which offers money back vouchers if shoppers could have bought the same items for less at Tesco or number two player Leeds-based Asda.

Mr Dorgan said: “We remain bullish about the long-term prospects for the sector.

“Rising population and increased concern about diet, provenance etc should lead to a continuation of the recent uptick in food as a proportion of consumer expenditure.”

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