Sainsbury’s chief executive Justin King today (13 June) stood by the UK retailer’s recent performance after the company missed City forecasts on its first-quarter sales.
The UK’s third-largest retailer reported a 1.4% increase in like-for-like sales, excluding fuel but including VAT, for the 12 weeks to 9 June.
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However, the consensus forecasts among City analysts was for growth of 1.9% and Sainsbury’s shares were down in London today.
Nevertheless, speaking to reporters after Sainsbury’s issued its trading update, chief executive Justin King said it was more important to look at how the retailer performed compared to its rivals in what was a “softer” market than in the previous quarter.
“If you look at the detail behind the headline numbers, in the quarter, our 1.4% growth would actually be a better beat to the market than our 2.6% was in quarter four,” King said. “We’re up against pretty strong comparisons. This was a strong quarter for us last year. We’re not disappointed, as we’ve said it’s in line with our expectations for the first quarter. As everybody knows, we set ourselves pretty challenging and stretching expectations.”
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The verdict from the City was mixed. ING analyst Jan Meijer called Sainsbury’s results “disappointing”, although Shore Capital’s Clive Black argued the forecasts of some analysts of a minumum 2% increase in sales were too high.
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By GlobalDataSainsbury’s trading update included its sales around the Diamond Jubilee. Earlier this week, Tesco, its larger rival, posted a 1.5% decline in like-for-like sales for the 13 weeks to 26 May, which did not include the public holiday.
King declined to reveal how much the extended public holiday was worth to Sainsbury’s but acknowledged it was “a record week outside of Christmas”. Nonetheless, he added: “Every grocery retailer is going to tell you that”.
However, King said Sainsbury’s was “the clear winner” over the Jubilee weekend although he tried to play down the specific impact of the public holiday on Sainsbury’s sales over the quarter as a whole, saying other factors weighed on sales during the quarter.
“If you take the quarter as a whole, it isn’t that exceptional. It’s like for like in terms of good news and bad news. The good news of a special royal occasion, the odd week of sunshine and some bank holidays and the bad news of some pretty challenging and unseasonal weather. We’re reporting a full quarter and it’s a quarter that is comparable with last year.”
King claimed Sainsbury’s out-performed the market no matter what time-frame against which retailers’ sales were measured. “We’re comfortable whether you take the weeks Tesco reported or the weeks we reported with the assertion that we beat the market by some margin,” he said.
The UK grocery sector continues to see falling volume sales; even if retailers report higher sales by value, once inflation is removed from the figures, it is clear volumes continue to be down.
King said Sainsbury’s saw inflation “at about 3%”, which equates to a fall in volumes of 1-1.5%, although he again said the retailer was “beating the market”.
Looking to the year ahead, King said he still expected volumes for the industry will fall in 2012 compared to 2011 but not by the 2% of last year. “It’s still at the 2-ish per cent level but we’ve got a long way to go in the year.”
