Sainsbury sees no let-up in shoppers’ restraint

Chief executive Justin King said: “There has certainly been a change in consumer behaviour since Christmas and we expect that to persist.

“It should not be a surprise that April was a bouncy month for retail in general. But I do not think we should extrapolate that.”

He said he is confident Sainsbury’s will continue to cope with tough trading conditions and outperform rivals.

The group, which is the UK’s third biggest grocer behind market leader Tesco and Leeds-based Asda, is benefiting from a drive to open stores in the north outside its heartlands in the south of England.

It has also been boosted by expansion online and the move into convenience shops and non-food ranges like clothing and homewares.

“We expect to keep beating the market, and I would expect the market to overall still be positive in terms of like-for-like sales this year,” said Mr King.

Pre-tax profits rose nine per cent to £665m in the year to March 19, beating forecasts of £660m despite the surprise news of worse-than-expected sales growth in the fourth quarter.

Sainsbury’s said it had outperformed the market in challenging conditions, as household budgets were put under significant pressure from price inflation.

It claimed to have made cost savings to keep its prices low to attract cash-strapped consumers, which helped its share of the grocery market increase to 16.3 per cent from 16.1 per cent a year ago.

Sales rose 7.1 per cent, including VAT sales tax, to £22.9bn, with convenience store sales topping £1bn for the first time, online sales growing at over 20 per cent and sales of non-food ranges growing at over three times the rate of food.

Finance director John Rogers said he is comfortable with the consensus profit forecast for 2011/12 of £721m.

The forecast has drifted down in recent weeks following the worse than expected fourth-quarter sales data.

Shore Capital analyst Clive Black said: “The sales dynamic of Sainsbury’s has eased back in recent months to one of ‘being in the pack’ rather than sustained outperformance.”

Credit Suisse analysts were disappointed by a 14 basis points increase in Sainsbury’s underlying operating margin, which they contrasted with a bigger rise at Bradford-based Morrisons.

Its net debt rose to £1.8bn from £1.5bn to pay for expansion.

Mr King denied analyst concerns about financial constraints on future expansion, saying the group had “plenty of funding”.

Average customer transactions rose to 21 million a week, up one million on a year ago.

Sainsbury’s now claims its TU brand is the seventh largest clothes retailer in the UK.

The company’s growth has also been boosted by opening 68 new stores, bringing its total to 934. Sainsbury’s Bank also put in a strong performance after operating profits increased 50 per cent.

The supermarket chain will maintain the rapid rate of store expansion, despite the difficult climate, and plans to open between 15 and 20 new supermarkets in the year and one or two convenience stores a week.

Store’s rebranding project

Sainsbury’s is to rebrand its 6,500 core own-label products under the ‘by Sainsbury’s’ logo.

The revamp – the biggest in the supermarket’s history – will be completed by 2013 and will mean that two-thirds of the products are either new or improved.

The move follows Sainsbury’s relaunch of its premium Taste the Difference range last year.

Mike Coupe, Sainsbury’s group commercial director, said: “This is a multi-million pound investment and the biggest ever own-label development in Sainsbury’s history. The new products will be benchmarked to be at least as good, if not better, than the category leader.”