Sainsbury's record Christmas as consumers return to tradition

The group said like-for-like sales rose by 4.2 per cent in the 13 weeks to January 2 – beating the 0.8 per cent increase seen at rival Marks & Spencer.

The group saw an extra million customers come through its doors each week, with this figure rising to 1.5 million in the seven days before Christmas.

Sainsbury's, the UK's third biggest grocer behind Tesco and Leeds-based Asda, said it had seen strong growth in non-food, which rose at four times the rate of food.

More people are buying toys, DVDs and clothes from supermarket as part of their weekly food shop. In addition seasonal events such as Halloween are boosting sales.

But Sainsbury's joined its rivals in warning of a tough 2010 as unemployment rises and taxes go up.

Chief executive Justin King said: "We don't see an improvement in the economic backdrop. We expect it to remain challenging. In 2010 we will see the reality of what people feared in 2009.

"The Government will have to raise taxes and reduce spending and it will be very tough."

That said, he pointed out that food accounts for only 10-12 per cent of the household budget.

The group reported a strong swing back to traditional values with customers opting to buy a whole turkey rather than a turkey crown, reflecting the switch back to family meal times and the days when people made their Christmas bird last for several meals.

"People have been looking for things that are comforting and reassuring," said Mr King. He said the pick-up in demand for whole turkeys reversed a recent trend towards turkey crowns and other meats.

Sainsbury's said its customers – traditionally seen as middle-class ABC1s – are buying both top of the range Taste The Difference products and its discount brand Basics.

"Customers are managing the total spend by buying Basics tomatoes and onions, but Taste the Difference mince," said Mr King.

The 4.2 per cent rise in sales was down from 5.4 per cent in the previous three months as a result of lower food price inflation. But it comfortably beat analysts' forecasts of a rise of 3.7 per cent.

Shore Capital analyst Clive Black described the update as "an excellent trading statement" and increased his full-year profit forecast by one per cent to 600m.

Sainsbury's finance director Darren Shapland said analysts' consensus profit forecast of 587m is likely to increase by between 5m and 10m.

Sainsbury's shares closed the day up 3.2 per cent, a rise of 10.2p to 328.2p.

The company has underperformed the index over the past year as

investors have favoured more cyclical stocks, like clothing and homewares, on hopes of an economic recovery.

Market researchers Nielsen said that non-food sales drove a strong Christmas for all four of Britain's top grocers.

Mr King said some of this demand was likely to be due to customers bringing forward purchases ahead of a rise in VAT sales tax on January 1.

Sainsbury's, which runs over 500 supermarkets and about 300 convenience stores, said it had offered over 1,000 permanent jobs to staff recruited temporarily over Christmas.

Leeds-based Asda, Britain's second-biggest grocer, said last week it had a "solid" Christmas, while industry leader Tesco will publish its seasonal sales figures next Tuesday.

Despite the difficult weather conditions in the run-up to Christmas, Sainsbury's said it maintained record levels of availability.

Sainsbury's is enjoying its fifth year of like-for-like sales growth, amid a turnaround in fortunes under chief executive Justin King.

The company said that online grocery sales grew by more than 15 per cent in the quarter, while a record half a million internet orders were delivered in the four trading weeks before Christmas.

County is key area for growth

Sainsbury's has identified Yorkshire as a key target area for expansion and is currently sizing up a number of sites for new stores in the region.

Sainsbury's is keen to expand out of its Southern heartlands into Yorkshire, Lancashire, the North East and Scotland.

While the retailer has a 20 per cent market share in the South, it has just an 11.4 per cent share of the Yorkshire market.

At the moment the group has just 36 stores in Yorkshire, out of a total of 828 stores, which means the region currently accounts for just four per cent of the group's outlets. Around 80 per cent of the group's future expansion plans will be targeted at the North and Scotland.

This will mean that 8,000 new jobs will be created in the North over the next two years, out of a total of 10,000 new jobs in the UK.

Sainsbury's raised 432m from shareholders last year to fund an ambitious expansion programme which includes opening 50 new stores over the next two years and extending 30-35 existing stores.