Safeway loses market share as growth slows

Safeway reported a slowdown in sales growth yesterday and admitted it was losing market share to rivals. Britain's fourth largest supermarket group said the deteriorating figures were a result of the company moving into the second phase of its recovery strategy.

Simon Laffin, Safeway's finance director, said: "Phase one was about a 'high-low' promotional pricing strategy which has won us 1.5 million new customers. Having got them, we want to make more money out of them by growing the average basket size."

Safeway's like-for-like sales in the six months to 12 October were up 1.9 per cent. However, this masked a decelerating trend with first-quarter growth of 3.3 per cent followed by just 1.1 per cent in the second. The figures compare with underlying growth of 3.9 per cent at Tesco and 2.4 per cent at J Sainsbury.

Mr Laffin said: "The sector has slowed significantly and within that a number of players have stepped up promotions. So while our like-for-like number might not be very big it is a profitable sales number."

The figures were in line with analysts' expectations though many were downbeat about Safeway's prospects. Andrew Fowler at Merrill Lynch said: "This is a business that is a third of the way through its refurbishment programme, which should be the sweet spot in its recovery, and yet it is losing market share.''

Mr Laffin claimed Safeway was seeing "strong" sales uplifts from its refurbished stores. However, he admitted some refurbishments were being used as defensive moves against new openings from rivals nearby.

Analysts have kept their full-year profit forecasts broadly unchanged at £370m. Safeway shares fell 0.5p to 214p.