Sains­bury's sales growth picks up on re­vamped ranges, price fo­cus

Kuwait Times - - BUSINESS -

LON­DON: Sains­bury's, Bri­tain's sec­ond big­gest su­per­mar­ket group, saw sales growth ac­cel­er­ate in its lat­est quar­ter, as it ben­e­fited from re­vamped food ranges and held down prices of staple goods de­spite ris­ing in­fla­tion. The group, which pur­chased Ar­gos-owner Home Re­tail last year, cau­tioned trad­ing con­di­tions re­mained tough, how­ever.

Sains­bury's and ma­jor ri­vals - mar­ket leader Tesco, Asda and Mor­risons - are grap­pling with the rapid growth of dis­coun­ters Aldi and Lidl and hav­ing to cope with more ex­pen­sive food im­ports due to a fall in the value of ster­ling since Bri­tain voted to leave the Euro­pean Union. "The mar­ket is com­pet­i­tive and we con­tinue to man­age cost price pres­sures closely," CEO Mike Coupe said yes­ter­day.

But he said Sains­bury's strat­egy of build­ing a dis­tinc­tive food of­fer rang­ing from own-brand "ba­sics" to spe­cial­ist "free from" and or­ganic lines; grow­ing its gen­eral mer­chan­dise and cloth­ing busi­nesses; and bear­ing down on costs, was work­ing. "Our strat­egy is de­liv­er­ing and we are well placed to nav­i­gate the ex­ter­nal en­vi­ron­ment." Shares in Sains­bury's rose up to 3 per­cent. "Sains­bury's has im­proved vol­ume growth while im­prov­ing their price po­si­tion in the quar­ter," said Bern­stein an­a­lyst Bruno Monteyne, who has an "out­per­form" rat­ing on the stock.

The group's re­tail like-for-like sales rose 2.3 per­cent, ex­clud­ing fuel, in the 16 weeks to July 1, its fis­cal first quar­ter - ahead of an­a­lysts' av­er­age fore­cast for a rise of 2 per­cent, and growth of 0.3 per­cent in the pre­vi­ous quar­ter. This was the first quar­ter fol­low­ing the Home Re­tail pur­chase for which the group did not is­sue sep­a­rate like-for-like sales data for Sains­bury's and Ar­gos.

"Our per­for­mance is re­ally driven by own la­bel (food)prod­ucts and the fact that we've in­vested a lot over the last few years," Coupe told re­porters, high­light­ing 430 new and im­proved prod­ucts in the quar­ter, in­clud­ing over 250 new Sum­mer eat­ing lines. He said that while over­all gro­cery in­fla­tion had trended up­wards in the quar­ter, Sains­bury's prices ver­sus com­peti­tors were bet­ter.

"We've done a great job with our sup­pli­ers within our own (la­bel) busi­ness to hold our costs down which means our price po­si­tion has im­proved in the quar­ter," said Coupe. He noted that prices of sta­ples, such as broc­coli, milk, ap­ples, chicken breasts and eggs were cheaper than they were three years ago.

Sains­bury's said to­tal gro­cery sales rose 3.0 per­cent, while trans­ac­tions at su­per­mar­kets were up 1.9 per­cent. Gen­eral mer­chan­dise sales in­creased 1.0 per­cent. On­line gro­cery sales in­creased 8 per­cent, while sales at con­ve­nience stores were up 10 per­cent.

Fi­nance chief Kevin O'Byrne said he was com­fort­able with an­a­lysts' av­er­age profit fore­cast of 572 mil­lion pounds for 2017-18, down from 581 mil­lion in 201617. Such an out­come would rep­re­sent a fourth straight year of profit de­cline.

Sains­bury's has held takeover talks with fran­chised con­ve­nience chain Nisa, ac­cord­ing to two in­dus­try sources, and is also re­port­edly con­sid­er­ing a move for whole­saler Palmer & Har­vey. Coupe, how­ever, wouldn't be drawn on pos­si­ble deals. "A busi­ness like Sains­bury's is al­ways look­ing at po­ten­tial op­por­tu­ni­ties. We talk to lots of peo­ple," he said. "Most of th­ese con­ver­sa­tions come to noth­ing," added O'Byrne. Sains­bury's said it re­mained con­fi­dent of de­liv­er­ing 160 mil­lion pounds of earn­ings syn­er­gies from the Ar­gos pur­chase by 2019 and was on track to achieve 145 mil­lion pounds of other cost sav­ings this year. — Reuters

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