UK’s Sainsbury tops forecasts

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Sainsburg REUTERS A Sainsbury's supermarket sign is seen in London January 11, 2012. British grocer J Sainsbury beat Christmas sales forecasts as store extensions and its expansion into convenience outlets, online shopping and non-food ranges helped it take market share in a tough trading environment.

London - J Sainsbury, Britain's third-largest grocer, beat forecasts for underlying sales in its fourth quarter, with strong growth online and in convenience stores offsetting a weaker performance in traditional stores.

The group, which trails market leader Tesco and No. 2 player Wal-Mart's Asda by annual revenue, said on Tuesday it was well positioned to continue to outperform the market in its new financial year, even though it expected the economic environment to remain tough.

Many of Britain's grocers are finding the going tough, despite their focus on essential goods.

Britain is teetering on the brink of a third recession in four years and consumers are fretting over job security, wages growth not keeping up with inflation and government cuts.

Last week No. 4 grocer Wm Morrison posted a 4 percent fall in 2012-13 underlying profit.

Sainsbury's said sales at stores open over a year rose 3.6 percent, excluding fuel, in the 10 weeks to March 16.

That was a 33rd consecutive quarter of underlying sales growth and compared with analysts' average forecast for a rise of 2.3 percent, and growth of 0.9 percent in the third quarter.

The firm said its convenience store business was growing at over 18 percent year-on-year, driven by a combination of new selling space and like-for-like sales growth. Online grocery sales increased nearly 20 percent year-on-year.

Sainsbury's total sales in the fourth quarter rose 6.3 percent, excluding fuel.

The group has also benefited from the success of its “Brand Match” pricing initiative, growth of own-brand sales and a big push into non-food areas such as clothing.

The firm's market share edged-up to 17.0 percent in the 12 weeks to February 17 from 16.9 percent a year earlier, according to market researcher Kantar Worldpanel.

Some analysts say Sainsbury's is vulnerable to a recovery at Tesco, which has invested 1 billion pounds ($1.6 billion) in a plan to revive its fortunes after a dismal Christmas in 2011 led to its first profit warning in 20 years. Last week Tesco launched a major new price initiative.

Shares in Sainsbury's, up 21 percent over the last year, closed on Monday at 365.2 pence, valuing the business at 6.9 billion pounds.

Some 26 percent of the equity is owned by the Qatar Investment Authority, which has recently been linked with a potential bid for clothing and food retailer Marks & Spencer. - Reuters


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