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
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor