Sainsbury closes gap on Asda as Morrison begins sales revival

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The Independent Online

J Sainsbury stole a further march over its rivals during Christmas, hitting its highest market share in nearly two years.

The resurgent supermarket chain is forecast to report its fourth successive quarter of accelerating sales today off the back of the best period for food retailers for 18 months. Data from TNS Worldpanel, a consultancy, showed grocery sales rose 4.3 per cent during the 12 weeks to 1 January.

The benign backdrop lifted Wm Morrison sales, giving analysts cause to hope its fortunes might finally be starting to turn. In particular, underlying sales at the 56 former Safeway stores that have traded as Morrisons for more than a year rose 5.7 per cent in the six weeks to 8 January, excluding petrol. This was a sharp acceleration from the flat sales reported in October.

During the past three months, Sainsbury's market share improved to 16.2 per cent from 15.9 per cent a year ago, TNS said. A further fall in Asda's share of the grocery market, to 16.7 per cent from 17.1 per cent a year ago, put Sainsbury's on track to overtake Asda's 16.7 per cent as the US-owned chain's boss, Andy Bond, recently warned.

In a trading update, Morrisons, whose chairman is Sir Ken Morrison, said group sales excluding petrol rose 2.8 per cent on a like-for-like basis. A further 2.9 per cent fall in like-for-like sale at the 122 original Morrisons stores continued to hold back progress to the disappointment of some. Sceptics also seized on a slight slowdown in the rate of underlying sales from the 220 stores converted less than 12 months ago, which at 9 per cent was less than the 11 per cent reported in October.

Bob Stott, the chief executive, said: "The growth from the stores converted more than a year ago should put a few minds at rest. This update demonstrates we're on the right road, but it's not the end of the journey by any means."

The group, which is searching for a replacement for Mr Stott, will reveal how it intends to resurrect its profits in March and repair its battered operating margin, which is less than 1 per cent. Exceptional costs of £300m will leave the group nursing heavy losses. It confirmed yesterday profits for the year to 28 January were still expected to be at the lower end of the £50m-to-£150m range it set last summer.

Analysts at Citigroup wrote in a research note: "Forthcoming statements by Tesco and Sainsbury's will put Morrisons in perspective and the fullness of time might show Morrisons' trading statement to be a bit disappointing."

Dresdner Kleinwort Wasserstein expects Sainsbury's to report quarterly underlying sales growth of 3.8 per cent, cementing its long-awaited recovery. As with Morrisons and Marks & Spencer, the City has already more than priced in its renaissance. Shares in Sainsbury's recently hit their highest level since 2002.