Christmas trade buoys Sainsbury's despite sales fall

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Sainsbury's drew encouragement from its Christmas trading performance today - despite posting another fall in sales.

Sainsbury's drew encouragement from its Christmas trading performance today - despite posting another fall in sales.

The supermarket chain company, which recently announced losses for the first time in its 135-year history, said like-for-like sales in the four weeks to January 1 fell 0.4%, although this figure improved to a 2.5% gain when petrol sales were included.

The performance in December represented a brighter trend for the chain after it said underlying non-petrol sales fell 1.2% in the last 12 weeks of the year.

The chief executive Justin King, who launched a sales-led turnaround programme in October, described the trading results as a "good first step".

He added: "After a difficult November, there was an improving trend over the Christmas and New Year period, which is encouraging given the tougher comparatives for the same period last year."

The company has been dogged by supply chain problems but said today it had been pleased with levels of stock availability over Christmas, as well as with customer service after it recruited an extra 3,000 staff.

Sainsbury's described the last three months of the year as "very competitive" and warned that the first quarter of 2005 was likely to be just as tough.

It said it had taken on rivals Asda and Tesco with price cuts on 6,000 products in the last year.

In November, Sainsbury's recorded half-year losses of £39 million after one-off costs from Mr King's turnaround plan hit bottom-line figures.

As well as new staff and supply chain improvements, Sainsbury's has pledged to spend at least £400 million on product quality and place more emphasis on fresh food and own label products.

Today's figures came as industry research suggested that Sainsbury's had stabilised its performance.

Till roll data from analysts TNS said the chain slowed its rate of decline and now accounted for 15.9% of all supermarket sales, although this is lower than the 16.3% share of the market it held 12 months ago.

Tesco maintained its dominant position in the sector by claiming a 29% market share, up from 26.6% a year ago.

Sainsbury's shares rose 1% today as investors expressed relief that the company had begun to show signs of stabilising its sales performance.

Rhys Williams, an analyst at Seymour Pierce, said: "Whilst we were hoping the group could produce flat like-for-like sales, a decline of 0.4% is not too bad a performance taking into account the competitive nature of the market.

"It looks like Sainsbury's has managed to stabilise its sales decline, and hopefully we will see underlying sales start to rebound from here."

The improvement in levels of stock availability came after Sainsbury's reopened two depots to cope with the peak in Christmas demand.

Mr King described the moves as "short-term fixes" and said the company still faced a three-year programme to produce longer-term improvements.

However, he believed the right steps were being taken.

"Since we laid out our strategy in October, we have made strides in availability. Customers have told us they noticed the difference over Christmas."

As part of previously announced cost savings, Sainsbury's said it expected that 750 head office jobs would be removed by April.