Sainsbury’s said today that its like-for-like sales were up 4.5% in the 13 weeks to January 3 (excluding petrol) – its fastest quarterly sales growth so far this year, and well ahead of the City’s forecast of around 3.8%. ‘Our best ever Christmas,’ proclaimed CEO Justin King this morning. And with over 22m shoppers pouring through its doors over Christmas, including its busiest ever trading day on December 23 (and having been there that day, MT can well believe it), it looks like Sainsbury’s is getting its pricing and promotions just about right.
It’s another impressive showing for King and Sainsbury’s, which some were expecting to be one of the big losers during the slowdown – in fact, it seems to be out-pacing the competition. Both Marks & Spencer and Waitrose have already reported a fall in sales over Christmas, so it looks like customers are (as expected) trading down to find value: Sainsbury’s said its sales were boosted by heavy discounting both before and after Christmas, while revenues from its cheapo Basics range were 40% up on last year. Its own-brand Tu clothing range also seems to be selling well (which is presumably bad news for specialist clothing retailers).
King was being sensibly cautious about Sainsbury’s prospects for the coming year: ‘The economic environment remains particularly challenging and we expect this to continue in 2009,’ he said today. And it’s worth noting that there was no word on how these discounts will affect margins – King said only that November’s VAT cut wiped about 0.4% off the sales figure compared to last year, while the falling fuel price has also had some impact (although fuel is pretty unprofitable anyway). Nonetheless, analysts are still expecting pre-tax profits to come in on target at around £530m, which won’t be much lower than M&S.
So naturally, Sainsbury’s share price is... down 3% this morning. It might seem a bit ridiculous that the likes of M&S, Debenhams and Next can report huge drops in sales and see their stock rise, while Sainsbury’s smashes forecasts and sees its price fall – but the City appears to be worried that its competitive environment is going to get even harder in the coming year. It’s already got a third of its products on discount, and if this proportion keeps creeping up, margins are bound to be affected.
Still, it all seems a bit topsy-turvy to us. By the looks of these figures, Sainsbury’s is doing a better job than most of reacting to the demands of an ever-changing market...
In today's bulletin:
Bank cuts rates again to all-time low
Sainsbury's surprises with record Christmas trading
UK job market sinking as Dell axes 1,900 in Ireland
What managers can learn from the England cricket fiasco
A flexible way to beat the January blues