Revenue growth at UK supermarket group Sainsbury’s will likely be driven by non-food sales and new store openings as food inflation slows in the UK.
Sainsbury’s today (24 March) revealed that comparable sales in the three months to 20 March dipped to 1.7%, excluding fuel.
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The company has seen its like-for-like sales slow throughout the year from a high of 7% in the first quarter, dipping to 5.7% in the second quarter and 3.7% in the third quarter.
Commenting on the result, chief executive Justin King said that the company’s sales had been hit by lower food prices and a cautious consumer environment.
“For much of the last few years, growth for us and the industry was driven by inflation,” he suggested.
According to King, food inflation is now “a little bit above nought”, meaning that the majority of revenue growth in the fourth quarter came from general merchandise sales.
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By GlobalDataNon-food sales grew three times as quickly as food sales, the company revealed, with total non-food sales up approximately 12%.
While this is in-line with Sainsbury’s expectations of two-to-three times, it represents a slowdown from the third quarter’s non-food revenue growth, which came in at four times food sales.
King said that Sainsbury’s non-food business “performed well” during the three month period. However, he insisted that general merchandise sales remained “complimentary” to the group’s core food offer.
“Great food at fair prices is at the core of our offer. We take a lead on providing healthy, fresh and tasty food by investing in product quality and developing ranges that really matter to our customers,” he said.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said that the performance of non-food remained a positive sign for Sainsbury’s in a challenging environment.
Hunter also flagged up the retailer’s efforts to increase selling space.
“After a successful Christmas period, the harsh reality of the economic situation has caught up with Sainsbury in the first weeks of this year,” he said.
“Prospects are not totally marred, however. The increase of store space is ongoing, whilst the performance of the non-food units provide some grounds for optimism.”
During the fiscal, Sainsbury’s increased its gross space by 6.8%. King said that the company is “on track” to deliver gross space growth of 15% in the two years to March 2011.
