Sainsbury's sales streak ahead of rival big grocers

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The Independent Online

Sainsbury's showed its big three grocery rivals a clean pair of heels yesterday by posting sales growth ahead of both their recent updates and City expectations. The grocer also raised the possibility that it could overtake Asda to become the UK's second biggest supermarket chain.

Justin King, chief executive of Sainsbury's, also revealed that the industry had seen a further uptick in promotions to a "historically high level" of between 35 and 38 per cent of products.

But he said that Christmas trading would be "steady as she goes" and that consumers had already "dialled into their behaviour the expectation of bad news", referring to the austerity measures to be unveiled this month.

Sainsbury's, the UK's third-largest grocer, delivered a 2.1 per cent rise in like-for-like sales, excluding fuel and VAT, for the 16 weeks to 2 October, helped by the relaunch of its £1bn Taste the Difference premium range in September and buoyant non-food sales. It came a day after Tesco reported that underlying UK sales were up just 0.4 per cent in the quarter to 28 August. For different reporting periods, Morrisons sales grew by 0.9 per cent, while Asda's were down by 0.4 per cent.

Mr King said: "If you look at everyone's most recent statements we are not a nose ahead, we are a good way ahead." He added: "I think we are the only one of the [core] grocers whose volumes are up."

Total sales, excluding fuel, jumped by 5.2 per cent at Sainsbury's, boosted by the 460,000 square feet of new space it added through new openings and extensions over the period.

Non-food sales, notably of childrenswear at its popular Tu clothing range, continue to grow rapidly and at around three times rate of food. While online sales jumped by 25 per cent over the quarter, Mr King said Sainsbury's had no current plans to launch clothing online.

The grocer, which has 872 stores in total, said its 335 convenience stores had broken through the £1bn annual sales barrier for the first time.

Despite many of its rivals battling for smaller shops, Mr King said there were "literally hundreds of stores [to buy] out there for our convenience business".

Asked about Sainsbury's sales leap-frogging Asda to grab second place in the market, Mr King said: "It is possible in the fullness of time if we keep growing and they [Asda] don't." However, he also repeated his mantra of "we don't need to overtake Asda to achieve our growth plans".

According to the latest Kantar Worldpanel data, Sainsbury's has a 16 per cent share of the grocer market, compared to Asda's 17.2 per cent and Tesco's 30.8 per cent.

Sainsbury's accelerated store opening programme – it will add 1.45 million sq ft of new space in 2010/11 – has led industry experts to predict that it would eventually overtake Asda. But the Walmart-owned grocer bought itself some time by acquiring Netto's UK business and 147 stores for £778m earlier this year.

Sainsbury's also admitted publicly yesterday that it was considering launching overseas for the first time in a decade, but Mr King tried to dampen speculation that an opening in China was on its short-term horizon. However, he confirmed that Sainsbury's does have a small team, reported to be six-strong, on the ground there looking at opportunities.

"Recently there have more conversations in the press about China than there have been within this company," he said. "You put a small team on the ground to understand the marketplace better and from time to time we'll do that in other international markets as well."

Perhaps surprisingly, Mr King stepped into the political fray to warn the Government about its plans to axe child benefit for individuals who earn more than £44,000. Mr King, who is on a 19-person Business Advisory Group for the Government, said: "We think if it falls on ordinary working people and their families who try to make ends meet that would not be a good thing."