Sainsbury’s hails record Christmas but Q3 sales slow

SAINSBURY’s confounded City expectations by ringing up its 36th consecutive quarter of sales advances today, but its shares slipped as it cut its full-year growth forecast amid tough trading conditions.

Sainsbury's: Ringing up yet another quarter of rising sales. Picture: Toby Williams

The supermarket major, which had been expected to post a like-for-like sales fall for the first time in three years, instead unveiled a rise of 0.2 per cent for the 14 weeks to 14 January.

However, as customers tightened their belts in October and November ahead of a Christmas spending splurge, the group forecast same-floorspace growth for the full financial year would be under 1 per cent. That compared with guidance of 1 to 1.5 per cent growth at the interim results.

Chief executive Justin King said the latest period had been a “game of two halves”, with a very difficult October and November followed by a record Christmas.

“We expect customers to spend cautiously in the few months following Christmas, in an attempt to rebalance the household finances,” King said.

“It’s the consumer backdrop that really makes it tough. If people haven’t got the money to spend, no matter how hard we try competitively as an industry, it won’t get spent,” he said.

Sainsbury’s shares fell 8.9p or 2.4 per cent to 360p.

The chain’s boss acknowledged the competitive threat from the discounter supermarkets such as Aldi and Lidl, but said it was “not a Christmas effect, it’s a year round effect”.

He said the discount chains, which have been eating into the sales of the big four supermarkets, “probably stock twice as many items today as they did two years ago”.

Aldi and Lidl both said on Tuesday that they enjoyed record trading over the festive period.

But King claimed that Sainsbury’s continuing sales growth amid a generally declining food retailing market and a backdrop of inflation outstripping wage growth showed its continued robustness.

He also said it was an “urban myth” that customers were

deserting higher-priced food for lower quality, citing Sainsbury’s upmarket Taste the Difference range “leading the charge” in the period, with sales up 10 per cent.

By contrast, the company’s lower-priced Basics brand had shown the slowest growth in its own label offering in the past few years, King added.

He said customers were eating less, but better, “perhaps having a roast on Sunday and perhaps making it last two or three days”.

The biggest sales growth at Sainsbury was in its convenience store arm, up 18 per cent, and online, up 10 per cent.

The seven days before Christmas was its busiest ever trading week, with more than 28 million transactions. Monday 23 December was the busiest day, with customers spending nearly £17 million during the busiest hour. Also on that day, Stanway in Essex was the group’s first ever store to take £1m in sales in one day.

Earlier in the latest quarter, King said that special occasion dates that usually trigger greater sales, such as Halloween and Bonfire Night, had been “washed out by extremely wet and windy weather”.