Sainsbury’s claims top spot in festive supermarket battle

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SAINSBURY’S claimed victory in the supermarket festive battle ahead of what are expected to be disappointing results from market leader Tesco today.

Sainsbury’s, the number three player behind Leeds-based Asda, said it had seen a “record breaking Christmas”.

The group appears to have beaten fourth player Bradford-based Morrisons although the sales are hard to compare as they cover different periods.

Sainsbury’s said like-for-like sales rose 1.2 per cent, excluding fuel and VAT sales tax, in the 14 weeks to January 7.

This was better than Morrisons’ 0.7 per cent increase for the six weeks to January 1.

Sainsbury’s beat the average forecast for 0.9 per cent growth and was modestly ahead of its performance in the previous quarter.

Shore Capital analyst Clive Black described the performance as “excellent” relative to peers, but added 1.2 per cent growth was by no means “stellar” and was at the low end of management’s ongoing target.

“Our view on the relative strength of Sainsbury’s performance is reinforced when we consider the relative disappointment delivered by Morrisons and what we expect to be a mellow performance from Tesco UK,” he said.

Sainsbury’s said that its festive performance was better than the 14-week performance, which included very low growth in October and November, but it declined to say what its performance was in the direct run-up to Christmas.

Once store extensions were taken out of Sainsbury’s like-for-like figure, sales were virtually flat.

Sainsbury’s chief executive Justin King said the group had seen no sign of customers giving up treats, saying that champagne sales rose 10 per cent compared with Morrisons’ seven per cent decline.

Sainsbury’s upmarket Taste The Difference range saw sales rise over 10 per cent during the quarter, with free range turkeys and Kirsch Christmas puddings selling well.

Mr King said he expects customers to be cautious in 2012, particularly in the first few months as they tighten their belts after Christmas.

He said that although the short term will be challenging, key events such as the Queen’s Diamond Jubilee and the Olympics should provide opportunities for growth.

Tesco is tipped to report its worst Christmas performance in the UK for decades today, due in part to its greater exposure to discretionary non-food goods, where shoppers have been economising the most.

Citi analysts said the drop in Tesco’s underlying UK sales could be as much as three per cent.

Sainsbury’s said its non-food sales grew faster than grocery sales, helped by a clothing range backed by celebrity fashion consultant Gok Wan.

Convenience store sales jumped almost 25 per cent, while online grocery sales climbed almost 20 per cent.

Sales of its lower-priced Basics ranges rose by around seven per cent, as did cooking ingredients, suggesting shoppers balanced Christmas treats with economies elsewhere.

Finance director John Rogers said he is comfortable with analysts’ full-year consensus profit forecast of £702m, suggesting margins held up. “Coming on the back of a good update from Waitrose and M&S food, it appears that Sainsbury’s has benefited from the element of the market that wanted to trade up and celebrate Christmas 2011 in particular,” said Mr Black.

“Just as those particularly seeking value seem to have migrated to Aldi, Lidl and Asda.”

Sainsbury’s said it will extend its price matching scheme, which promises to match prices at Tesco and Asda or give customers money off vouchers, into 2012.

“Customers love the reassurance it gives them,” said Mr King.

“Less than half the time they get a voucher, so they know they won’t pay less at Asda and Tesco.”

Customer transactions in the week before Christmas increased by 1.5 million to a record 26 million.

The update comes after market research figures revealed Sainsbury’s achieved its highest share of the market since March 2003 with 16.7 per cent, while Tesco lost share.

Tesco, the UK’s biggest supermarket chain, triggered a price war in September with its Big Price Drop campaign.

The campaign prompted Sainsbury’s to introduce its Brand Match scheme and Asda to offer a guarantee to be 10 per cent cheaper than rivals.