Growth dips but Sainsbury's bullish

Published on Wednesday 7 October 2009 20:56

SAINSBURY'S rejected claims it was losing ground to arch rival Tesco yesterday, saying it was serving an extra 800,000 shoppers a week.

Britain's third-largest retailer, which has been growing faster than its largest rival this year, said it was still taking market share, despite second-quarter growth slipping.

But its shares fell by more than 3 per cent as Sainsbury's revealed that like-for-like sales growth had fallen from 7.8 per cent in the first quarter, to 5.4 per cent in the three months to 3 October.

Chief executive Justin King denied the group's momentum was slowing and rejected claims by Tesco counterpart Sir Terry Leahy earlier this week, who said Britain's largest retailer had once again overtaken its rivals.

King said: "Our figures are bang up to date, you've seen what they are (and] they're obviously better than Tesco reported."

Leahy told reporters at Tesco's interim results presentation on Tuesday that, while Tesco had lagged its rivals in the early part of the year, it was now outpacing its competitors.

King rejected Tesco's claims, although he refused to give detailed figures on Sainsbury's growth in the last few weeks, the period Leahy was referring to.

King said: "No figures were quoted (by Tesco] yesterday … our figures are bang up to date on Saturday night."

Sainsbury's said it was now completing 18.5 million customer transactions every week, an 800,000 rise on a year ago.

The increase came largely from its 19 new stores, 14 of which were acquired from Somerfield and the Co-operative Group.

King also said that customers were starting to buy more expensive products again, with sales of its premium ready cooked meals increasing by a quarter on a year ago.

Consumers, King said, "are in a much better place" than a year ago, with mortgage interest rates down sharply and food price inflation "virtually gone".

But the supermarket chain's chief executive cautioned against expectations of a continued upswing in sales, saying there are further difficulties ahead.

"There have been encouraging signs for a quarter or two, but there is still some tough stuff to come," he said, pointing to an increase in the rate of VAT, rising unemployment, and a possible increase in tax and interest rates.

King has been linked with a possible move to become chief executive of Marks & Spencer, when Sir Stuart Rose steps aside to become chairman.

Yesterday King refused to rule out the move, but said after a strong revival Sainsbury's was the "most exciting place" in UK retail. He added: "I intend to stay and play may part in that."