Sir Peter Davis, chairman and CEO of the UK’s second largest supermarket chain, Sainsbury’s, revealed yesterday that strong sales growth during its third quarter meant that Sainsbury’s could confound analysts’ predictions of a slowdown in the supermarket sector.
“We haven’t seen any slowdown yet,” said Davis, “and these are the most recent figures in the market.”
Sainsbury’s third consecutive quarter of strong like-for-like growth, saw sales rise by a better than expected 6%, excluding petrol. Total sales in the group’s 400 stores during the 16-week period to 13 October were 7.7% higher, compared with 8.6% in the first three months. Excluding money taken at new stores and petrol forecasts, comparable sales grew 6%.
Early Wednesday trading in London saw Sainsbury’s shares jump 4.5% to 372.25 pence and prompted analysts to re-adjust their forecasts for the full year. The grocer is now expected to produce profits of around £610m (US$869.4m) pre-tax, on sales of more than £17bn. Market watchers warned however that while everyone was surprised by the continued growth touted yesterday, the sector’s buoyant trading conditions are unlikely to last much longer.
Davis, former CEO of the Prudential said: “In July, I said it was unlikely the industry could maintain its current growth rate, and I think the industry rate of growth has come down, but Sainsbury’s like-for-likes have held firm. I believe we are now ahead of the industry average.”
Stressing that the once-struggling grocer is snapping at the heels of sector giant Tesco and other rivals such as Wal-Mart’s Asda group and Wm Morrison, he stressed: “I believe we are now up with the leaders.
“I liken it to a long race around a track. We’ve now caught up with the leading bunch after being back in the middle of the pack last year.”
Comparatively, Sainsbury’s can be seen to be gaining market share from its rivals. According to the Institute of Grocery Distribution‘s index, where the grocer has languished below the medium for many years, the firm under Davis has appeared in the upper half for the last two quarters.
Sainsbury is currently six months into a three-year campaign to turn the business around and Davis explained that the company is on track to make £150m of cost savings this year, and £660m over the next three years.
Davis attributed the growth in part to a new price-cutting campaign launched in September. The group invested £100m in reductions on 800-1000 key items to help improve the supermarket’s competitiveness in what he called a “dog-eat-dog” market.
The group’s advertising campaign, which relies heavily on the popular appeal of celebrity chef Jamie Oliver, has also been congratulated for upping sales and driving footfall. An extra 1m shoppers returned to Sainsbury’s during the quarter, despite the disruption in the 36 stores earmarked for refurbishment, at the cost of £90m.