Sainsbury's slides as sales fall short of forecasts

Sainsbury's sales grew just 1% last quarter, half as much as the City expected. But CEO Justin King says it's still ahead of the game.

by James Taylor
Last Updated: 19 Aug 2013
Sainsbury's shares have taken a battering this morning, after the supermarket said it saw like-for-like sales growth of just 1% in 10 weeks to March 19. That's only half as much as the City expected, and well down on the 3.6% it posted in the previous quarter. This isn’t entirely surprising; with customers increasingly wary about splashing the cash, all the supermarkets are going to have similar problems. And CEO Justin King insists Sainsbury's focus on new store space, its non-food sales growth and its 'universal customer appeal' is helping it stay ahead of its biggest rivals...

For a chain that many felt would come a cropper during the downturn - squeezed by the discount retailers at one end, and the likes of Waitrose at the higher end - Sainsbury's has fared remarkably well in the last couple of years. And it seems to have done ok recently, too: researchers Kantar reckon that Sainsbury's enjoyed the strongest growth of all the big four supermarkets over the Christmas period, of 4.5%. Though perhaps ominously, Lidl and Aldi managed 13.6% and 13.4% respectively.

Today's figures - which are for the fourth quarter of Sainsbury's financial year - have clearly disappointed the City. But King did have some stuff to boast about: apparently it's now pulling in 21m customers a week, 1m more than last year, while non-food sales continue to grow at three times the rate of food and its online groceries business is seeing growth of 20% per year (albeit from a low base). So King’s strategy still seems to be paying off.

Still, as King admits, these are tough times for the industry - with customers facing 'fuel price inflation, uncertain employment prospects and government spending cuts', Sainsbury's et al are going to have to work a lot harder to convince us to spend our money. The rise of Aldi and Lidl - and the recent aggressive cost-cutting by Tesco and Asda - suggest that the competitive environment is going to get even tougher for Sainsbury's. And if it tries to follow suit, margins will obviously be hit.

King remains bullish: he's on course to beat his target of increasing retail space by 15% before March 2011. But he wouldn't mind a bit of help from the Government – he wants them to show us, as he told the Today programme, 'how things get better in time'. He's not the only one.

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