Sainsbury bullish despite market slowdown
slowdown in sales as its main rival Tesco, but nonetheless posted
satisfactory growth for the second quarter of the year.
The slowdown in UK food retail sales noted by Tesco earlier in the year has been confirmed by the group's main rival, Sainsbury. In a trading statement issued yesterday, the UK's number two supermarket chain said that it had continued to make good progress despite a marked slowdown in the market.
Like-for-like sales at Sainsbury's Supermarkets, the group's main UK business, grew by 2.5 per cent in the second quarter, while overall growth at the core business was 3.9 per cent. Like-for-like sales growth at Shaw's, the company's US chain, was 2 per cent, making it one of the better performers in the depressed US retail sector, the company said.
Peter Davis, group chief executive, said that the recent launch of the Nectar loyalty card - the UK's broadest loyalty scheme including BP, Debenhams and Barclaycard as well as the supermarket group - had been well received and had helped the chain outperform the market as a whole in the few weeks since its launch.
"In the first week, enough cards were picked up to cater for 40 per cent of UK households and we believe its introduction will have a positive long-term effect on our business. This, together with benefits being achieved through our store reinvigoration programme, leads us to expect a stronger second half," Davis said, adding that the positive launch of Nectar had helped offset the losses encountered in the first quarter following the loss of the Air Miles account to Tesco.
"We are now in the second year of our business transformation programme and are making significant progress upgrading the business in terms of product ranges, stores, supply chain and IT re-platforming. We are achieving strong savings through our cost efficiency programme and are confident of delivering our target of £200 million (€316.8m) this year," Davis continued.
Shaw's maintained its strong number two position in New England during the quarter, helped by a substantial improvement in like-for-like sales growth compared to the first quarter, Davis added.
"We remain confident that we are making real progress across the group to achieve our targets. Our sales and profit margins are both continuing to improve, our ambitious infrastructure programme is on track and we are achieving our planned cost savings."
Sainsbury has had something of a rough ride in recent years, especially since Tesco overtook it as the UK's leading food retailer. While it perhaps has a reputation for having higher prices than its nearest rivals, its quality image is good and there is nothing fundamentally wrong with the business model, and the continuing restructuring programme should help it narrow the gap to Tesco.
But with the British number one in particular benefiting from a major international business, it will be interesting to see whether Sainsbury also decides to push into new markets in a bid to offset the slowdown in both the UK and the US. While it is perhaps too early to talk of international growth - Sainsbury still needs to get its domestic house in order, after all - most of the major chains in Europe are cross border players and Sainsbury will almost certainly have to follow suit if it wants to play in that league.
