June 12, 2013 / 6:41 AM / 5 years ago

UPDATE 2-Sainsbury outshines Tesco with sales rise

* Q1 like-for-like sales up 0.8 pct, excluding fuel

* Slowdown from Q4 reflects comparison with Jubilee last year

* Q1 total sales up 3.3 pct, ex fuel

* Says well placed to continue to outperform market

* Shares up 0.4 pct, up 26 pct in last year

By James Davey

LONDON, June 12 (Reuters) - Sales at Britain’s No. 3 grocer J Sainsbury outperformed market leader Tesco in the first quarter, stellar growth online and in convenience stores more than offsetting sales falls in traditional supermarkets.

The group, which trails Tesco and Wal-Mart’s Asda by annual revenue, said it expected to continue to steal share from rivals, even though it anticipated Britain’s tough economic environment would persist through 2013.

“What we’re looking at is data that still says people’s outlook is pretty downbeat but not as downbeat as it was,” Chief Executive Justin King told reporters on Wednesday.

Britain’s supermarkets, despite their focus on essential goods, have not been immune to the economic downturn and are battling intensely for market share.

Online and smaller local convenience stores are the two fastest growing areas in the industry as shopping habits change. Consumers are increasingly using the internet to shop and high fuel prices are discouraging trips to town centres and out-of-town malls.

Sainsbury’s online grocery sales rose 16 percent in the 12 weeks to June 8, its fiscal first quarter, while convenience store sales increased 20 percent.

Those channels drove a 0.8 percent rise in the firm’s sales at stores open over a year, excluding fuel.

That was a 34th consecutive quarter of underlying sales growth. Analyst forecasts had ranged from growth of 0.6 to 2 percent.

National retail sales data for May are due on June 20, with industry surveys giving a mixed picture after a plunge in April.


Sainsbury’s performance compared to a first-quarter like-for-like sales fall of 1 percent at Tesco, a 1.8 percent decline at No. 4 grocer Wm Morrison, and a 1.3 percent rise at Asda, albeit for different trading periods.

But it did represent a slowdown from growth of 3.6 percent in the fourth quarter of the 2012-13 year.

That mainly reflected comparisons with an extra bank holiday last year to celebrate the Queen’s diamond jubilee but it also reflected pressure on food sales in core stores.

King said that stripping out the contribution of online and convenience, like-for-like sales in core stores were negative.

“You must remember that our online sales are an in-store pick model, so as far as our stores are concerned that still represents growth and leverages that asset,” he said.

Shares in Sainsbury‘s, up 26 percent over the last year, were up 0.4 percent at 364 pence at 0934 GMT, valuing the business at about 6.9 billion pounds ($10.8 billion). They had fallen initially after the sales numbers were published.

“The performance is below par in terms of bricks and mortar core food sales ... We think the shares will continue the recent pause for breath,” said Panmure Gordon analyst Philip Dorgan.

Sainsbury‘s, whose current grocery market share is at a decade high of 16.8 percent, just behind Asda, 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 kitchen electricals and cookware.

And unlike Tesco and Asda it has not been implicated in the horsemeat scandal, with none of its products testing positive for equine DNA.

While Sainsbury’s is currently the fastest-growing of Britain’s quoted grocers, monthly industry data has shown high-end player Waitrose, owned by John Lewis, and discounters Aldi and Lidl recording the strongest growth over the last year.

Sainsbury’s total first quarter sales rose 3.3 percent, excluding fuel.

Last month the firm forecast like-for-like sales growth for the 2013-14 year of 1 to 1.5 percent.

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