We are beating our rivals, insists Sainsbury

Speaking at a trading update yesterday, Sainsbury's chief executive justin King said: "We are clearly ahead of our rivals. We're not a nose ahead, we're a good way ahead. We've just posted the best performance over the past three or four months."

Last month Dalton Philips, the new chief executive of Bradford-based Morrisons, said Morrisons was a "nose ahead" of rivals.

Yesterday Sainsbury's, Britain's third biggest grocer behind Tesco and Leeds-based Asda, reported quarterly sales at the top end of forecasts.

The group said like-for-like sales in the 16 weeks to October 2 rose 2.9 per cent, up from 1.1 per cent in the first quarter and higher than forecasts of a 2.3 per cent increase.

It beats the 1.2 per cent increase reported by Tesco on Tuesday for the 26 weeks to August 28 and Morrisons' 0.9 per cent increase for the six months to August 1.

However Tesco's results miss out September and Morrisons' miss out both August and September.

A combination of strong online shopping sales, increasing demand for its upmarket 'Taste the Difference' range, and strong growth in non-food items such as clothing have helped Sainsbury's to grow market share.

Mr King said he expects the economic environment to remain difficult for shoppers as the Government raises taxes and reduces public spending.

But he said the coalition Government's austerity drive will not necessarily damage demand further.

"The consumer environment is challenging, but that has been the reality for consumers for a long time. There is no reason consumer sentiment should dip in the wrong direction. The consumer has already dialled in cuts in public spending. We are well set for continued growth."

Asked whether the Government's planned cuts to child benefit will disproportionately hit Sainsbury's, which has traditionally catered for the more upmarket shopper, he said he didn't think so.

"We have 20 million customers a week. Our customer profile reflects a broad section of the UK, we have a universal appeal. We'll not be hit by changes that hit the slightly wealthier."

Earlier this week the Government announced plans to axe child benefit for people paying the higher rate of tax.

Mr King said he does not envisage a big rise in grocery prices, despite a survey out yesterday that showed UK food price inflation climbed at its fastest rate since June 2009.

Arden Partners analyst Nick Bubb called Sainsbury's figures "pretty impressive" and predicted small upgrades to full-year profit forecasts.

Sainsbury's finance director John Rogers said he thought the consensus forecast for a full-year profit of just under 655m might rise by about 5m.

But RBS analyst Justin Scarborough said much of the good news was already priced into Sainsbury's shares which have risen more than 20 per cent this year.

Last night Sainsbury's shares fell 0.6 per cent to close the day at 387.1p.

Mr King said higher food prices contributed just over one percentage point to underlying sales growth in the last three months.

He added that while inflationary pressures appear to be rising, he does not see a significant increase in the months ahead.

Sainsbury, which is expanding into convenience stores, online and non-food ranges, said total sales rose 6.6 per cent in the 16 weeks to October 2.

The group said new stores are performing ahead of expectations, non-food sales are growing at three times the rate for food, led by childrenswear, and online sales are up over 25 per cent.

Sainsbury's said last month's relaunch of the premium 'Taste the Difference' range has been well received by shoppers as they turn to special meals at home in place of restaurant trips.

Mr King said Sainsbury's is continuing to look at a potential entry into China, but signalled any move was a long way off.

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