Sainsbury's delivered strong sales growth yesterday, but its shares plummeted by 15 per cent yesterday, as investors fretted about a flight to rivals in a recession and the sale of 10 per cent of its shares.
The UK's third largest grocer delivered like-for-like sales, excluding fuel, up 4.3 per cent for the 16 weeks to 4 October. The uplift was driven by robust sales of non-food and customers switching to buying Sainsbury's cheaper own-label products instead of brands, as well as bigger product packs. City analysts had been expecting underlying sales growth of 3.9 per cent.
Justin King, Sainsbury's chief executive, said that non-food sales were growing at nearly three times the rate of food sales and its Basics own label products were up 30 per cent. "Grocers tend to do well in recessionary times because people still need to eat," Mr King said.
He said Sainsbury's food inflation was running at about 6 per cent, but he expected it to come down further unless new shocks, such as a spike in oil prices, emerge.
Mr King also said that Sainsbury's was taking market share from upmarket grocery rivals. "We are stealing very successfully from M&S and Waitrose."
Last week, M&S posted like-for-like food sales down by 5.9 per cent for the 13 weeks to 27 September while Waitrose's sales fell by 0.7 per cent for the week to 27 September.
However, Tim Attenborough, the Exane BNP Paribas analyst, said that when the growth of Sainsbury's non-food sales and inflation is stripped out, the grocer delivered negative like-for-like food sales.
Yesterday, Kaupthing Bank, the Icelandic bank that has hit financial difficulties, put up for sale a 10 per cent stake in Sainsbury's yesterday held by the property tycoon Robert Tchenguiz.Reuse content