UK supermarket Safeway has reported its eighth consecutive increase in quarterly sales above 5%. Like-for-like sales increased 5.4% in the 16 weeks to October 13. Safeway has cited new customer attraction and rising average spend as the reasons for its performance. Despite some analyst pessimism over the solidity of these results, if this performance continues, Safeway’s rivals will have cause for concern.
Things have been going well for Safeway since the arrival of Carlos Criado-Perez as CEO, with a turnaround in performance and like-for-like sales increasing. Following the success of its ‘deep discounts’, which were limited to certain products, in certain regions for a certain time, the firm is now moving into phase II of its strategy.
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Following on from its initial gains Safeway is now embarking upon a program of store refurbishments, which it claims is running ‘on track’. Currently 33 stores are undergoing refurbishments and the firm is confident of good returns.
The early performance of refitted stores would appear to back this confidence up. Safeway maintains that new stores are better perceived by customers, carry a better product mix and are experiencing growth in sales.
The solidity of Safeway’s performance is not universally accepted, however. Andrew Fowler, an analyst at Merill Lynch has stated that “Safeway is only performing in line with the industry now – at best,” ABN Amro has stated that it is “concerned about the quality of the growth” and believes it to be unsustainable.
The jury is therefore still out on Safeway, but its results are a lot better than before Mr Criado-Perez took over as CEO. Although the industry may be more buoyant than some predicted, Safeway’s results should not be taken lightly. If it can attract new customers it is certainly doing something right. If it can keep them then it will be a formidable competitor.
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By GlobalData
