Sainsbury's bucks the recession

published 27 March 2009

"A fabulous performance" was Shore Capital analyst Clive Black's verdict. Sainsbury's, Britain's third-biggest supermarket chain, reported its fastest rate of underlying sales growth in two years this week. In the 11 weeks to late March, sales at shops open at least a year grew by 6.2% excluding fuel.

This proved a stark contrast to the fortunes of high-street retailers. The March Confederation of British Industry (CBI) survey was close to the record levels of weakness seen in December when the survey reached "its lowest level since records began in 1983", said Daniel Pimlott in the FT. Sainsbury's profited from food inflation, Deutsche analyst James Collins told Bloomberg food is a big part of the business and its wealthier customers are flocking to stores as they trade down from eating out to eating in. But there was also a 60% jump in sales of its new 'Basics' range of thrift goods.

"Upscale" supermarkets in bad recessions aren't supposed to do well, said Rachel Sanderson on Breakingviews. But Justin King "has done a good job partly by correcting past mistakes". It seems cheap promotions are luring in shoppers who turned their back on Sainsbury's in the 1990s, when the shelves were poorly stocked and prices too high. The group could now be in for a run like Morrisons', which has successfully rebranded in the past 18 months.