Sainsbury continues to steal share of market

The group, which trails Tesco and Wal-Mart’s Asda by annual revenue, said yesterday it expected to continue to steal share from rivals, even though it anticipated Britain’s tough economic environment would persist through 2013.

“What we’re looking at is data that still says people’s outlook is pretty downbeat but not as downbeat as it was,” chief executive Justin King said.

Britain’s supermarkets, despite their focus on essential goods, have not been immune to the economic downturn and are battling intensely for market share.

Online and smaller local convenience stores are the two fastest growing areas in the industry as shopping habits change.

Consumers are increasingly using the internet to shop and high fuel prices are discouraging trips to town centres and out-of-town malls.

Sainsbury’s online grocery sales rose 16 per cent in the 12 weeks to June 8, its fiscal first quarter, while convenience store sales increased 20 per cent.

Those channels drove a 0.8 per cent rise in the firm’s sales at stores open over a year, excluding fuel.

Sainsbury’s has also prospered with its ‘Live Well for Less’ offer to hard-pressed households squeezed by falling real wages.

That was a 34th consecutive quarter of underlying sales growth. Analyst forecasts had ranged from growth of 0.6 to 2 per cent.

Mr King said: “This has been a solid performance in what continues to be a tough consumer environment.”

National retail sales data for May are due on June 20, with industry surveys giving a mixed picture after a plunge in April.

Latest retail figures from Kantar Worldpanel show Sainsbury’s was the only one of the four large supermarkets to gain market share – with the others being squeezed by the likes of Waitrose and Aldi at opposite ends of the market.

Sainsbury’s performance compared to a first-quarter like-for-like sales fall of one per cent at Tesco, a 1.8 per cent decline at number four grocer Morrisons, and a 1.3 per cent rise at Asda, albeit for different trading periods.

But it did represent a slowdown from growth of 3.6 per cent in the fourth quarter of the 2012-13 year.

That mainly reflected comparisons with an extra bank holiday last year to celebrate the Queen’s diamond jubilee but it also reflected pressure on food sales in core stores.

Mr King said that stripping out the contribution of online and convenience, like-for-like sales in core stores were negative.

“You must remember that our online sales are an in-store pick model, so as far as our stores are concerned that still represents growth and leverages that asset,” he said.

Shares in Sainsbury’s, up 26 per cent over the last year, were up 0.4 per cent at 364p yesterday morning, valuing the business at about £6.9bn.

They had fallen initially after the sales numbers were published.

“The performance is below par in terms of bricks and mortar core food sales ... We think the shares will continue the recent pause for breath,” said Panmure Gordon analyst Philip Dorgan.

Sainsbury’s, whose current grocery market share is at a decade high of 16.8 per cent, just behind Asda, has also benefited from the success of its ‘Brand Match’ pricing initiative, growth of own-brand sales and a big push into non-food areas such as kitchen electricals and cookware.

And unlike Tesco and Asda it has not been implicated in the horsemeat scandal, with none of its products testing positive for equine DNA.

While Sainsbury’s is currently the fastest-growing of Britain’s quoted grocers, monthly industry data has shown high-end player Waitrose, owned by John Lewis, and discounters Aldi and Lidl recording the strongest growth over the last year.

Sainsbury’s total first quarter sales rose 3.3 per cent, excluding fuel. Last month the firm forecast like-for-like sales growth for the 2013-14 year of 1 to 1.5 per cent.

Over the quarter the company opened 19 convenience stores, refurbished a further 13 and is on track to deliver around two new stores per week over the year. The supermarket’s run of quarterly growth dates back to 2005 amid a turnaround in fortunes since the arrival of Mr King a year ear- lier.

Last month he committed his future to the grocer after reports suggested he was set to leave to become boss of Formula One motor racing.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Sainsbury has maintained its slow but steady progress, which in itself means that it has trumped most of its rivals.

“The very fact that the period represents the 34th consecutive quarter of growth is a testament to the company’s resilience during what has been a difficult economic time.”

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