Sainsbury's leapfrogs Tesco as summer brings sales boost

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The Independent Online

A fillip from two weeks of sunny weather and demand from peckish World Cup fans lifted J Sainsbury's like-for-like sales past Tesco's in the supermarket chain's best quarter in more than four years.

Notching up a further milestone on its recovery journey, Sainsbury's said underlying sales excluding petrol rose 5.7 per cent in the three months to 17 June. It was the group's sixth consecutive quarter of like-for-like sales growth.

Justin King, the chief executive, said: "This is the second quarter we've been ahead of Tesco and I don't think we've done that for a while." It was the group's best period since Christmas 2002, when the industry was growing at 6 per cent, he added.

Even excluding the football-related boost, Sainsbury's estimated it was growing at around 5.2 per cent, which compared with the 4.5 per cent like-for-like sales increase Tesco reported earlier this month.

But analysts pointed out that Sainsbury's had benefited from easy comparisons as well as recent exceptional sales. "The last ten years at Sainsbury's is littered with examples of periods where sales growth perked up, only to wither and die at the first sign of tougher comparables," Philip Dorgan, at Panmure Gordon, said.

Sainsbury's continued to cut prices during the three months, but deflation eased to just 0.9 per cent from 2.2 per cent in the previous three months. Despite growing concern that inflationary pressures are building, Mr King said: "The fact that deflation is less doesn't mean there is any less vigour in price competition... We're significantly improving our price position."

The group has promised that sales growth will translate to stronger profits towards the end of its financial year but did not guide analysts to increase their forecasts yesterday. The consensus profit forecast remained at £340m to £345m.

Since Sainsbury's began its three-year turnaround programme, which is predicated on increasing sales by £2.5bn, its revenues have increased by more than £1bn, Mr King said. The outperformance has come from food sales, while the contribution from non-food, where it is weak, and convenience stores, where it is a smaller player than Tesco, is in line with expectations.

Sales of salad, BBQs and food to eat outside have soared on the back of the warmer weather.

Sainsbury's remains Britain's third-biggest supermarket behind Wal-Mart's Asda, despite expectations that it would have overtaken Asda by now. Mr King said Sainsbury's would "really have to significantly outperform" Asda to leapfrog it, given that its rival tends to do well in the summer.