Bloomberg News

Sainsbury Sales Beat Estimates After ‘Record’ Christmas

January 12, 2012

(Updates with closing share price in fifth paragraph.)

Jan. 11 (Bloomberg) -- J Sainsbury Plc, the U.K.’s third- largest supermarket owner, reported third-quarter sales growth that beat analyst estimates as the grocer sold more luxury food and budget ingredients to win a battle for Christmas customers.

Revenue at stores open at least a year rose 2.1 percent in the 14 weeks ended Jan. 7, the London-based retailer said today in a statement. That compared with the 1.8 percent median estimate of eight analysts compiled by Bloomberg. Growth was 1.2 percent excluding value-added tax, the company said.

Sainsbury counted a record 26 million transactions in the week before Christmas, up 1.5 million from the previous year, as customers responded to a price-matching campaign and new products such as the “Gok for Tu” women’s clothing range. The retailer is battling for business with competitors such as Tesco Plc as rising food and fuel prices restrain shopper spending.

“Sainsbury’s Christmas performance has remained more robust than peers,” said Matthew Truman, an analyst at JPMorgan Cazenove. He has an “underweight” recommendation on the stock.

Sainsbury fell 1.2 percent to 302.1 pence in London, mirroring the broader market.

Sales of the higher-priced “Taste the Difference” range rose more than 10 percent in the period, Sainsbury said, helped by purchases of Norfolk Black Free Range turkeys and almost 50,000 of the new Kirsch Cherry Filled Christmas Pudding.

Purchases of the basics line also gained, with sales of unsalted butter up 82 percent and dried fruits up 30 percent as more Britons indulged in home baking, the retailer said.

Online Revenue

Online grocery revenue increased almost 20 percent as the company delivered a record 160,000 orders a week.

General merchandise and clothing sales grew faster than food, Sainsbury said, without being specific. The non-food business isn’t “stretching its legs” as much as it was earlier in the financial year, though still performed better than the broader market, Chief Executive Officer Justin King said.

The Gok Wan range helped drive sales of apparel after it was introduced on Nov. 17, the company said.

Britons will be “battening down the hatches” in January and February as they account for Christmas costs and manage budgets, King said. Events later in the year including the London 2012 Olympics, Paralympics and Queen’s Diamond Jubilee will be a “real occasion to drive growth,” he said.

The CEO said this year will be “at least as hard,” as 2011 and doesn’t expect any “uptick in the consumer backdrop.”

Brand Match

Sainsbury plans to extend its Brand Match campaign into 2012, King said. The retailer began the program in October as it fought for shoppers with larger rivals Tesco and Wal-Mart Stores Inc.’s Asda. Tesco is scheduled to announce tomorrow how it fared over the holiday. Earlier this week, smaller competitor William Morrison Supermarkets Plc reported slower sales growth over Christmas as competitors fought harder for business.

Sainsbury held its market share at 16.1 percent in the 12 weeks though Dec. 24, according to Nielsen market research.

Finance Director John Rogers said he doesn’t expect consensus full-year pretax profit estimates to change from 702 million pounds ($1.08 billion) after today’s figures.

--Editors: Paul Jarvis, Sara Marley

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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