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Sainsbury's quarterly sales outstrip Tesco

Sainsbury's has continued to battle through Britain's economic malaise, recording sales growth figures for the last three months that comfortably beat those of rival Tesco.

Despite missing analyst forecasts, Sainsbury's, Britain's second-largest supermarket chain, is in an upbeat mood. It told the City it benefited as families partied to celebrate the royal wedding and enjoyed the "glorious" weather in April.

"We sold nearly 300 miles of bunting, 159,000 flags and 49,000 mugs. Hot cross bun sales increased 29% and we sold the most champagne we have ever sold outside of Christmas," the company said.

Like-for-like sales across the group, excluding fuel, rose by 1.9% in the 12 weeks to 11 June, beating Tesco's 1% rise. According to company insiders, Sainsbury's underlying sales (stripping out VAT as well as fuel) were around 1% higher. On Tuesday Tesco reported that its underlying sales were 0.1% lower.

Sainsbury's chief executive, Justin King, described the consumer environment as tough. However, Sainsbury's appears to have been less affected by the impact of high petrol prices, which Tesco blamed for its own disappointing performance. It reported that its three own label ranges – Basics, By Sainsbury's and Taste the Difference – all saw volume and sales growth in the period.

Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown, said Sainsbury's value food ranges were becomingly increasingly important as "the consumer concentrates more discerningly on the household budget".

Anna Smee, a business strategist at Hundred Consulting, said many shoppers were treating themselves to top-of-the-range food from the supermarket rather than going to restaurants.

"It will be some time before spending on entertainment activities outside the home starts to pick up again," she said.

Sainsbury's has been expanding its non-food offering, an area in which Tesco has a significant lead. Demand for electrical items suffered in recent months as consumers cut back, but Sainsbury's reported that its general merchandise and clothing sales grew faster than food.

Again, this was a stronger performance than Tesco, whose non-food sales were down by around 5%. On the downside, though, it means that Sainsbury's food sales grew less than its overall average.

Geoff Ruddell, analysts at Morgan Stanley, pointed out that Sainsbury's non-food sales growth is partly due to its programme of extending existing stores, and suggested that the pace may be slowing.

Source : Graeme Wearden -

"There is no mention in today's statement that non-food sales are growing three times as fast as food, which is something that Sainsbury's has said consistently in recent quarters," Ruddell added.

15 June 2011
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