Tesco's sales growth slips behind rival Sainsbury's for first time in 6 years

Britain's biggest food retailer, Tesco, yesterday revealed that it had failed to match the sales growth at its arch rival J Sainsbury over the Christmas trading period.

Tesco reported an increase of 6.2 per cent in underlying sales, excluding petrol, for the seven weeks to 5 January. That lagged an underlying 6.8 per cent rise at Sainsbury's for the first time in six years. The news sent Sainsbury's shares 11p higher to 375.5p, while Tesco's gained 0.75p to 237.75p.

Analysts were divided on whether this showed that Tesco had been knocked off its top perch. One analyst said: "This must be seen in the context of tough comparatives for Tesco this time last year. Really it is much of a muchness. A difference of 0.6 per cent is not convincing enough to make a case."

Tesco's trading update came one day after Sir Peter Davis, Sainsbury's chief executive, claimed that he had clawed back market share from Tesco, the sector leader, as his major store refurbishment programme bore fruit. James Collins, an analyst at ABN Amro, said yesterday's figures represented a "real change in the competitive environment", adding that Tesco would struggle to keep pace with Sainsbury's and Safeway because the pair were yielding less customers. "The industry is still fantastic. What's really worrying Tesco is that it is on a big premium to the sector because people expect outperformance," he said.

However, a Tesco spokesman said that the gains at Sainsbury's included 1.5 per cent price inflation, while Tesco's included deflation. Stripping out price inflation, Tesco's sales increased by 6.7 per cent compared with 5.3 per cent at Sainsbury's, he said.

Analysts expect all supermarkets to struggle to produce such impressive like-for-like figures in 2002 as they come up against last year's tougher comparisons.

Meanwhile, Safeway, which is revamping its stores to draw customers, reported an underlying sales gain of 4.1 per cent for the 12 weeks to 5 January. This compared with a 5.9 per cent rise a year earlier and was in line with expectations. Interim figures from Somerfield showed that the fifth-largest supermarket chain had moved into the black after years of decline. Underlying sales in the six months to 10 November grew by 2.9 per cent, boosted by rising sales at its Kwik Save stores.

Somerfield's shares rose 9.75p to 100p while Safeway's were unchanged at 307p.