Blog: Budget boost for downbeat King
Dean Best | 23 March 2011
Sainsbury's chief executive Justin King struck a gloomy tone this morning (23 March) when discussing the outlook for UK consumer confidence - and his mood could hardly have been helped by the dent in the retailer's share price today - but parts of the UK Budget announcement may have brightened his mood.
Shares in the UK grocer were down more than 6% this afternoon after the company provided details of its sales in the fourth quarter in its fiscal year.
The retailer recorded a slowdown in sales growth during the fourth quarter with like-for-like sales increasing 1% on a reported basis. King, however, admitted that like-for-like sales actually fell between 0.5-1% once the impact of VAT and store extensions was removed.
Richard Hunter, head of UK equities at stockbrokers Hargreaves Lansdown, said the sales figures would have disappointed the market and added: "Despite a continuing high-profile advertising campaign couple with a strengthening online presence, there seems a limited range of positives for investors to chase. In the background, the Qatari stake continues to overhang the shares, and the group lacks the geographical diversification of some of its rivals."
That said, Sainsbury's results pushed down the share price of other UK retailers, with Tesco's and Morrisons' stock coming under pressure throughout the day.
King's comments about consumer confidence matched the gloomy mood heard in the wider UK press ahead of today's Budget announcement.
However, the headlines from Chancellor George Osborne's Budget initially seem positive (although the devil is often in the detail) for consumers and business - the ongoing deficit-reduction measures and the lowering of the forecast for economic growth notwithstanding, of course.
Personal tax allowances are rising, corporation tax has been reduced, fuel duty cut and planning constraints lifted - the latter of which could boost UK retailers.
The UK's Food and Drink Federation welcomed the coalition government's announcements on fuel duty and on climate change.
"We strongly support the decision to extend Climate Change Agreements to 2023 on which we have been lobbying the Government in recent weeks, in view of the real incentive that they provide for our members to reduce carbon emissions," the FDF director general Melanie Leech said. "We also welcome the restoration of the Climate Change Levy discount on electricity to 80% from 2013."
Leech added: "We are also pleased to see the planned increases in fuel duty scrapped and a fuel price cut effective from tonight. Food manufacturing is heavily dependent on fuel and any increase imposes an enormous burden on our members."
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