Investment: Safeway figures bring cheer to supermarkets

SAFEWAY yesterday provided some upbeat news for the supermarket sector with a solid Christmas trading update which showed the company had escaped the squeeze on sales which has affected Sainsbury's.

Safeway's sales in the six weeks over the Christmas and New Year period were up by 2.9 per cent on an underlying basis, stripping out petrol sales. Though this is behind the 4.1 per cent sales rise reported by Tesco last month, it is well ahead of the 1.2 per cent gain announced by Sainsbury's in its disastrous trading statement last Friday.

Safeway's margins have been slightly affected by an increase in promotional activity on its best-selling lines as well as a mini price war on specific products such as eggs, milk and now bread.

The company's shares edged 2p lower to 276.5p on the news after an initial rise suggested relief that the figures contained no unwelcome surprises. Colin Smith, chief executive, who has issued several warnings on profits in the past year or so, said the figures reflected the company's attempts to improve product availability and value after last year's problems. He also claimed Safeway has outperformed the industry sales average for the past nine months, though analysts said this had only been achieved by investing heavily in the gross margin.

"These figures are nothing to get carried away about," said one analyst. "In the first six months of the year they were giving a lot away on margins and in the last three months they have been up against very easy comparisons."

A glance at Safeway's share price tells the story. The shares are well off their peak in the summer and over the past year have under-performed the All Share by 28 per cent. Market share has been more or less maintained at around 9.5 per cent but Safeway has not made up ground even on third placed Asda, let alone on the market leaders.

Management will brief analysts later this month on Safeway's brand positioning. The company has made much in the past of its focus on targeting higher- spending younger families. But this is hardly unique and Safeway's claim to be more family-friendly is only backed up by services such as creches in a small proportion of stores.

The board is soon to be strengthened with the appointment of a new retail director. This may help improve focus but the fact is that Tesco's increasing grip on this sector means rivals are having to compete ferociously just to stand still.

On full-year profit forecasts of pounds 350m, the shares trade on a forward multiple of 12. This is cheap for a supposedly defensive play but as one analyst puts it, given the increasing competition, "the shares are only likely to tread water".

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Louis van Gaal
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Arts and Entertainment
Jay Z has placed a bet on streaming being the future for music and videos
Arts and Entertainment
Festival-goers soak up the atmosphere at Glastonbury
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own