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Sainsbury’s enjoys Christmas boost after tough quarter

J Sainsbury reported slightly higher like-for-like sales for the third quarter, with the competitive Christmas period boosting the supermarket chain.

While total sales were up 2.5 percent in the third quarter, like-for-like sales excluding fuel were up 0.2 percent from a year ago.

Shares in the group were trading lower by 1.1 percent in morning trade. The supermarket chain warned that demand could soften.

The group's chief executive, Justin King, said the quarter had been characterized "by a very tough sales environment throughout October and November" with customers saving up in order to treat their families over the Christmas period.

Despite the slight sales growth, however, he said the Christmas period had been the group's "best Christmas ever."

King said the group expected consumers to "spend cautiously" at the start of 2014.

"As with last year, we expect customers to spend cautiously in the few months following Christmas, in an attempt to rebalance the household finances. The general economic backdrop remains uncertain for many families, so helping them to Live Well for Less remains the key to continuing our market outperformance," he said.

In November, Sainsbury's reported a seven percent rise in first half underlying pre-tax profit, of £400 million ($656 million) versus £374 million a year before.

Then, the U.K.'s third biggest supermarket in terms of revenue after Tesco and Wal-Mart's Asda said it had increased its market share to 16.8 percent, the highest for a decade.

Phil Dorrell, director of retail consultants at Retail Remedy, said that despite a "fair softening" in the numbers, the "overall position" for Sainsbury's was still a positive one.

"With like-for-like sales of 0.2 percent,some analysts will suggest that the balloon is about to burst and that harder times lie ahead. I think this is not only premature but a misinterpretation of the market," he told CNBC.

"All the large grocers are having a tougher time of it at present as the disposable incomes of their customers are eroded by cost of living increases unmatched by income growth…Sainsbury's is still outperforming online, still likely to be confirmed as the number two retailer ahead of Asda this year and still delivering improved margins," Dorrell said.


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