Jamie campaign helps Sainsbury's to 5% Christmas sales surge

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The latest advertising campaign fronted by the celebrity chef Jamie Oliver, better-stocked shelves and a raft of price cuts ensured the recovery at J Sainsbury continued apace over Christmas.

Sales were surprisingly strong over the crucial 12 weeks to the end of December, jumping 5.2 per cent on 2004's figures in a fourth successive quarterly improvement.

A record 19 million shoppers visited Sainsbury's supermarkets during Christmas week, when the number of transactions was 10 per cent better than during the corresponding period last year. More bottles of champagne were shifted than tins of baked beans as customers gave themselves a treat. Premium foods ranges did well too.

Fifteen months into a three-year recovery programme to "make Sainsbury's great again", sales are picking up faster than Justin King, the chief executive, had expected. "We are very pleased with our performance, which is an important further step in the recovery of our business. We were not expecting to be able to sit here and talk about 5 per cent sales growth. Yes, we are ahead of the curve," he said.

The market research group TNS revealed this week Sainsbury's, the country's third-biggest supermarket group, has grown its market share to 16.2 per cent from 15.9 per cent a year ago. Andy Bond, Asda's chief executive, admitted recently Sainsbury's was likely to regain the No 2 slot in the spring, behind the runaway market leader Tesco with its 30 per cent share. But he pledged to escalate a price war in which prices eased 1 per cent in the quarter.

Mr King, who has taken on 3,000 extra workers to iron out problems in the supply chain, cautioned that costs must be reined back and times remain tough on the high street. He said soaring sales growth will be harder to sustain when set against improved performance at the start of the recovery a year ago. "When we deliver a fifth quarter of growth, we will have turned the business around with growth on growth," he said.

Simon Proctor, a retail analyst at Charles Stanley, said: "They're obviously good figures, but they're coming from a very low base and it's coming at a considerable cost. Even if you make some pretty optimistic assumptions about what level of margin improvement they can get, the shares still look overvalued." He advised clients to sell.

Sainsbury's shares, which rallied sharply in December and outpaced Tesco shares by about 20 per cent over 2005, closed down 10.5p at 313.75p.

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