LONDON: British grocer J Sainsbury’s reported its “best Christmas ever” yesterday but warned that consumers were likely to tighten their belts in the early part of 2014 and cut its sales growth forecast accordingly.
“We expect customers to spend cautiously in the few months following Christmas, in an attempt to rebalance the household finances,” Chief Executive Justin King said yesterday.
That caution and a revision to its sales forecast for the full year sent the share price down by up to 2.7 percent to 359 pence, trimming a gain of 11 percent over the last year.
Though there are signs of an improving economy Britain’s major food retailers are finding the going tough as consumers’ disposable incomes remain under pressure from wage rises not keeping up with inflation.
Analysts reckon all of the UK’s “big four” grocers — Tesco, Wal-Mart’s Asda, Sainsbury’s and Morrisons — lost market share and saw like-for-like sales volumes decline in the run-up to Christmas, reflecting a subdued overall market and increased promotional activity.
“It’s the consumer back-drop that really makes it tough. If people haven’t got the money to spend, no matter how hard we try competitively as an industry, it won’t get spent,” King told reporters.
Sainsbury’s which trails market leader Tesco and is battling with Asda to be the UK’s second-biggest grocer, said sales at stores that have been open over a year rose 0.2 percent, excluding fuel, in the 14 weeks to Jan. 4, its fiscal third quarter, with total sales up 2.7 percent.
Though that was ahead of analysts’ forecasts which ranged from flat to down one percent and represented a 36th consecutive quarter of underlying sales growth, it was a slowdown from second-quarter like-for-like growth of two percent.
Chief Financial Officer John Rogers said he expected a similar outcome in the fourth quarter and revised like-for-like sales growth expectations for the full current year to “just below 1 percent” from 1-1.5 percent previously.
King said the quarter was characterised by a “very tough sales environment” throughout October and November, but with record numbers of customers and strong sales in the key period over Christmas. The “big four” are also being squeezed on market share between discounters Aldi and Lidl and up-market grocers Waitrose and Marks & Spencer.
Waitrose reported on Wednesday a 3.1 percent rise in like-for-like sales for the five weeks to December 31, while the Co-operative Group posted a 1 percent increase in the Christmas quarter.
Reuters
