Sainsbury's fourth quarter sales beat market forecasts

Sainsbury unveiled strong fourth quarter results on Tuesday as the supermarket saw customer transactions grow to a record 22.9m per week.

The grocer's total sales for the 10 weeks to March 16th jumped 7.1%, driven in part by quality control amid a Europe-wide horsemeat scandal.

Sainsbury was the only one of the four largest UK supermarkets, which also include Tesco, Asda and Morrison, to increase its market share last month after the Food Standards Agency ruled its beef products were free of horsemeat.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Like-for-like sales for the fourth quarter rose 4.2% while like-for-like sales for the year climbed 2.1%, beating analysts' estimates. Jefferies International had predicted a 2.2% growth for the quarter and a full-year incline of 1.6%.

Weekly customer transactions increased by over 800,000 year-on-year and 22.9m per week.

"We have delivered strong sales in the fourth quarter, increasing market share and outperforming in what remains a tough retail environment," said Chief Executive Officer, Justin King.

"Our focus on quality is an important reason why customers choose to shop with us, and why we are seeing strong growth in our own-brand products."

He said sales have risen around 9.0% year-on-year as the re-launch of Sainsbury's own brand range nears completion.

The company's Brand Match has also proven a big hit. The initiative allows customers to compare the price of Sainbury's brands against rival supermarkets. Clients receive a coupon at the till if they can show they could have bought a comparative brand for a lower price at Tesco or Asda.

"Brand Match (originally launched in October 2011) has certainly resonated in addressing Sainsbury's perceived weak price offering," Jefferies said.

The group has also heavily invested in its supply chain, including its work with farmer development groups to ensure the fresh supply of chicken and beef.

Sainsbury's convenience business is growing at over 18% year-on-year, boosted by new space and strong like-for-like sales.

The firm added 163,000 square feet of new space, comprising three supermarkets and 19 convenience stores during the quarter. Over the year, the company added 14 supermarkets, eight extensions and 87 convenience stores, bringing the total gross new space to just over 1.0m square feet, up about 5.0%, in line with targets.

Online grocery shopping increased sales by nearly 20% year-on-year. The general merchandise and clothing business is mounting at nearly three times the rate of food, reaching a milestone £1.0bn worth of annual sales in February and a record 19% year-on-year increase in sales for the month of January.

"We now regularly serve over 190,000 customers a week with customer service and availability scores at an all time high," King said.

"We expect the challenging economic environment to continue through the coming year. By helping our customers to 'Live Well for Less' through our ongoing commitment to great quality own-brand products, Brand Match, competitive pricing and targeted promotions via Nectar and coupon-at-till, we are well positioned to continue to outperform the market."

RD