SAINSBURY’S has continued turning the screw on big rival Tesco as it is set to unveil another market-beating sales increase this week.
Analysts believe a 34th successive quarter of like-for-like sales increases is on the cards after Sainsbury’s recently announced its fifth year of profit growth in a row.
It was the only one of the four large supermarket chains to gain market share – with the others being squeezed by the likes of Aldi and Waitrose at opposite ends of the market.
Sainsbury’s has prospered with its “Live well for less” offer to hard-pressed households squeezed by falling real wages.
Chief executive Justin King – who saw his annual pay package surge to £4.3 million – is credited with turning around the supermarket’s fortunes since joining in 2004.
He last month committed his future to the grocer after reports suggested he was set to leave to become boss of Formula One motor racing.
Announcing profits up by 6.2 per cent to £756m, he said Sainsbury’s had enjoyed a “year like no other” during a period when it sponsored the Olympics and events to mark the Queen’s Diamond Jubilee.
Analysts believe King will post a rise in group like-for-like sales of 1.9 to 2 per cent on Wednesday. That would be down on the bumper 3.6 per cent jump in Sainsbury’s underlying sales for the final quarter of its last financial year. But the latest quarterly performance is set to still comfortably outstrip its rivals, with Tesco reporting a 1 per cent fall in Q1 like-for-like UK sales last week.
Brokers at Investec said latest independent data from retailing consultancies such as Nielsen and Kantar suggested the group “has continued to trade very well” although “not immune to industry problems”, primarily supermarket sector capacity outstripping consumer demand.
Analysts also expect King to say the supermarket group’s convenience store, non-food and online operations have all continued to perform strongly.
King has told the City that this year the company will pass a milestone of having more convenience stores than bigger traditional supermarket outlets.
“As Tesco and Morrisons, in particular, have had their problems over the past 18 months, Sainsbury’s has been the standout performer,” one analyst said.
“There is no reason to suspect that the group won’t have continued in this vein in the latest quarter. There are longer term challenges for the sector, such as convenience stores cannibalising tradition core estate sales. But in the short term Sainsbury’s looks the most robust in the sector.”
Markets, however, were jittery about the group’s decision to buy the 50 per cent stake in Edinburgh-based Sainsbury’s Bank held by Lloyds Banking Group, for £248m, fearing that while sensible, it could add risk.
Sainsbury’s believes rival Tesco Bank had the complication of attempting to launch current accounts and mortgages. Sainsbury’s Bank has no current plans to do this, focusing instead on credit cards, loans, savings and insurance products.