Sainsbury gaining ground on rival Tesco

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SAINSBURY’S reported better than expected sales yesterday as it benefits from the troubles facing larger rival Tesco.

While Sainsbury’s doesn’t see any sign of an increase in consumer confidence this year, it expects the Diamond Jubilee, the Euro 2012 football championships, the London Olympics and the Paralympics to boost shopper sentiment.

Chief executive Justin King estimated that the Diamond Jubilee alone will have as big a beneficial impact as Easter.

“Our expectation is the overall consumer backdrop will be very cautious, but there are reasons to be cheerful,” he said.

“National celebration will lift the public mood. The Jubilee and the Olympics are a once in a lifetime opportunity for people to come together in their communities and celebrate.”

He believes that people will manage their household budgets ahead of the celebrations to make sure they can afford some luxuries.

Shares in Sainsbury’s rose 4.5 per cent to close up 13.8p to 319.3p after like-for-like sales rose by 2.6 per cent, excluding fuel, in the 10 weeks to March 17.

That beat analysts’ average forecast of 2.1 per cent.

Sainsbury’s rivals, which include market leader Tesco, Leeds-based Asda and Bradford-based Morrisons, are yet to report their recent trading performance. The latest data shows Sainsbury’s has gained market share, while Tesco has lost ground.

In January, Tesco issued its first profit warning in living memory and last week it parted company with the head of its UK business, Richard Brasher.

Mr King refused to be drawn on whether Sainsbury’s has benefited from Tesco’s woes, saying: “We don’t require anyone else to fail for us to succeed.”

Mr King said Sainsbury’s has continued to outperform the market and gained market share.

The group ‘basics’ range reported a 10 per cent increase in sales while its upmarket ‘Taste the Difference’ range saw sales increases of 20 per cent.

Mr King said this reflected customers’ saving money on everyday items so they can afford special food and special occasions.

He added that a big part of the group’s success has been the ‘Brand Match’ pricing promotion, which offers customers money-back coupons if their shop would have been cheaper at one of Sainsbury’s rivals.

“Brand Match has definitely helped,” said Mr King. “It has proved our prices really are competitive. Over half the time customers are getting a coupon showing how much cheaper their shop was at Sainsbury’s.”

He added that sales from convenience shops, online and non-food are all growing ahead of the market.

Sainsbury’s grew its share of the convenience store market, with sales up 20 per cent following the opening of 15 new stores.

The group claimed to be the fastest growing online grocer with trading up more than a fifth after it served an average of 165,000 customers a week.

Analysts at Seymour Pierce stockbrokers expect pre-tax profits of £710m for the financial year just ended and £770m in the current year.

Over the 10 weeks to March 17, Sainsbury’s added 170,000 square feet of gross new space, including two new supermarkets, three extensions, and 15 new convenience stores.

This brings its total gross new space in the year to 1.4 million square feet.

It opened 19 new stores at an average size of just over 39,000 square feet, extending 28 stores by an average of 15,000 square feet, and opening 73 new convenience stores.

Sainsbury’s is keen to push store openings in the North of England, including Yorkshire. The London-based grocer has previously concentrated on its Southern heartlands.