Bosses at Tesco must be scratching their heads today, after Sainsbury’s reported a like-for-like sales increase of 0.8% in the 12 weeks to 8th June. That’s the 34th quarter in a row that Sainsbury’s has managed to report sales growth. Tesco, on the other hand, reported a 1% drop in sales last week. Looks like that horsemeat is really sticking in people’s throats.
So, against a backdrop of a market slump after last year’s Jubilee, how is Sainsbury’s managing to pull growth out of the hat? Well, it has been focussing on expanding its convenience stores business. Shoppers are increasingly heading to their local store instead of the mega-sized supermarkets. It is more costly to stock convenience stores, but if that’s where the money’s headed then it makes sense to invest in it. Sainsbury’s is expanding its portfolio of these by 50 in London and the South East this year alone.
Chief executive Justin King says he expects the environment to ‘remain challenging’ (if we had a quid for every time a CEO said that), but also pointed out that Sainsbury’s is the only major supermarket to grow market share in the period, up 0.2% to 16.8%. He says: ‘During the quarter we lapped some of our strongest performance of last year, culminating in the Queen's Diamond Jubilee, and have extended our track record to 34 quarters of like-for-like growth.’
So what else is going on at Sainsbury’s? Last month, King confirmed the supermarket chain will buy the remaining 50% share of Sainsbury’s Bank from Lloyd’s Banking Group for £248m. This will be opportunity to enhance loyalty among its customers, he says. ‘Full ownership will allow future products to be even more tailored to Sainsbury's customers, leveraging Nectar data to drive sales uplift in both financial services and our supermarkets business.’
It’s all a bit jargony, but basically he wants Sainsbury’s to pocket all of the profit from its banking operation, and in doing so to increase the benefit of using your Nectar points when you do your weekly shop. It’s worth noting that Tesco is hot on his heels: the UK’s largest retailer is currently spending £1bn on revamping its stores and hiring more staff to try and combat its increasingly cold, corporate image. You can expect the battle of the supermarkets to rage on.