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Sainsbury's enjoyed busiest week ever in runup to Christmas Sainsbury's posts lowest sales growth for nine years
(about 17 hours later)
Sainsbury's announced flat sales over Christmas but said it had performed well in the face of stiff competition and weak consumer spending. Sainsbury's scaled back its sales expectations for the year on Wednesday after posting its slowest sales growth for nine years and warning that shoppers are cutting back on the amount of food they buy.
Revenue excluding new stores and fuel sales edged ahead 0.2% in the three months to 4 January. Sainsbury's said trading was difficult in October and November as customers saved up for Christmas but that sales increased strongly over the main festive period. The supermarket said sales, excluding new store openings and fuel, had inched up by just 0.2% in the 14 weeks to January, despite prices rising by some 2.5%.
Justin King, the Sainsbury's chief executive, said the week leading up to Christmas was Sainsbury's busiest ever with more than 28 million transactions. But he was cautious about the outlook as cash-strapped customers rein in spending to put their finances in order. But finance director, John Rogers, said the chain had put in "a strong performance in a difficult market" that had seen more promotions than last year.
King said: "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." The big supermarkets are facing multiple problems: shoppers are buying more online; making more shopping trips to convenience stores rather than big out-of-town superstores; and reacting to squeezed incomes by taking their custom to discounters such as Lidl and Aldi.
Sainsbury's shoppers redeemed £120m of Nectar points to help pay for their Christmas shop, up 9% on the previous festive period. Chief executive, Justin King, said: "This must be the toughest backdrop there's ever been. It's tougher for customers today than it's been in a generation.
Sainsbury's is the first of Britain's big four supermarkets to update investors on its performance over the important Christmas trading period. Analysts expect Tesco to reveal like-for-like sales down by about 2% when Britain's biggest grocer posts trading figures on Thursday. "The economy is in recovery and that's manifesting itself in more jobs, but the vast majority of people who have stayed in work have got less money in their pockets." He said he expected shoppers to remain cautious for "quite a while".
The big four, also comprising Asda and Morrisons, have been caught between the rise of upmarket Waitrose and discounters Aldi and Lidl. The two German value chains have claimed their best ever UK Christmas trading. While the three-monthly performance was better than analysts expected, shares in the grocer sank 2.4% to 360p as Sainsbury's said it was set to record underlying sales growth of just below 1% for its full year against its previous prediction of up to 1.5%.
Waitrose, part of the John Lewis Partnership, revealed branch sales excluding new stores up 4.1% in the 12 trading days before Christmas and up 3.1% in the five weeks before Christmas. The Co-operative also outperformed Sainsbury's with like-for-like sales up 1.0% in the 13 weeks to 4 January, it said on Wednesday. King admitted that Sainsbury's total rise in sales, excluding fuel, of 2.7% over the quarter was flattered by food price inflation and strong sales of general merchandise such as clothing as well as new store space. General merchandise, which also includes homewares, is more profitable than food sales and the better performance of those goods may help the chain raise its profit margins.
Hopes of a bumper Christmas on the high street, fuelled by economic recovery and rising consumer confidence, have been dashed as households have suffered a continued squeeze from rising prices and stagnant wages. Aldi, Lidl and the upmarket Waitrose chain all saw much bigger sales gains over Christmas, but King insisted Sainsbury's was now more competitive than ever on price and had not lost customers to either discounters or upmarket rivals.
"I think shoppers are buying a little bit less but a little bit better quality," he said pointing to a 10% increase in sales of Sainsbury's premium own-label range, Taste the Difference.
Waitrose, owned by the John Lewis Partnership, revealed on Wednesday a 3.1% rise in underlying sales in the five weeks to Christmas Eve boosted by a 33% rise in online grocery sales.
The Co-op, meanwhile, said it had seen a 1% rise in underlying sales at its grocery stores in the 13 weeks to 4 January, boosted by a bigger rise in sales at its small local stores. Upmarket Majestic Wine also revealed its Christmas results, with sales up 2.8%.
Independent market share figures will not be released until next week, but Sainsbury's relative performance should become clearer on Thursday when Tesco, the UK's biggest supermarket, reveals its Christmas trading figures. Analysts expect Tesco to reveal like-for-like sales down by about 2%.
Bryan Roberts, director at industry analysts Kantar Retail, said: "The fact Sainsbury's has posted an increase of only 0.2% in like-for-like sales is indicative of a slowdown by the retailer. In context of the likely performance of major competitors and against last year's decent comparatives, however, this is another respectable showing.Bryan Roberts, director at industry analysts Kantar Retail, said: "The fact Sainsbury's has posted an increase of only 0.2% in like-for-like sales is indicative of a slowdown by the retailer. In context of the likely performance of major competitors and against last year's decent comparatives, however, this is another respectable showing.
"Although Sainsbury's is among the better placed supermarkets to cope with whatever the market throws at it, we retain concerns that its profitability will come under mounting pressure in 2014.""Although Sainsbury's is among the better placed supermarkets to cope with whatever the market throws at it, we retain concerns that its profitability will come under mounting pressure in 2014."
Sainsbury's sales performance was at the top end of City forecasts and shares in the group rose 3% in early trading, to 380p. All the food retailers to have reported performance so far have noted a late rush, promotions that were heavier than usual and strong performances online and in convenience stores.
Mike Coupe, commercial director at Sainsbury's said: "Christmas is always promotional but this year was like no other." He said several stores had brought forward promotions that they might usually have launched in January.
He added that trading was particularly difficult in October and November as customers kept a tight rein on spending after splashing out over the unusually warm summer.
Trading also suffered as Halloween and Bonfire Night, both of which usually boost sales at supermarkets as the nation prepares to party, were literally a "wash out," according to Coupe, marred by rain in many parts of the country.
King said Sainsbury's had been able to achieve its 36th consecutive quarter of underlying sales growth largely thanks to a strong December. The chain had its busiest ever week leading up to Christmas with more than 28m transactions.
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