Slowdown in sales growth fuels fears over Sainsbury's recovery
J Sainsbury, Britain's second-largest supermarket operator, reported a slowdown in sales growth yesterday, with the performance dented by an end of its deal with Air Miles. The news caused a 7.4 per cent fall in the shares to 287p as some analysts expressed concern about the strength of the group's recovery.
At its annual shareholders' meeting yesterday, Sainsbury's said that in the 12 weeks to 22 June underlying sales, excluding petrol, were up by 2.7 per cent on the same period the previous year. In May the group's chief executive, Sir Peter Davis, had warned that sales growth would slow as it ended its contract with the Air Miles frequent flyer programme.
Sir Peter said this has knocked 1 per cent from the like-for-like sales figure. Sainsbury's is part of a new loyalty scheme called Nectar, which includes BP, Debenhams and Barclaycard and is due to be launched in the autumn.
He said the whole market was slowing and that it was difficult to judge the impact of declining stock markets on consumer confidence. "Food retailing is generally not affected by slowdowns as people tend to eat out less and eat at home more," he said. "But I can't believe people's confidence about their investments [in the stock market and in pensions] will not have an impact." He added that the sector was likely to see underlying sales growth of 3-4 per cent for the rest of the year.
Some City analysts said Sainsbury's figures were disappointing and had been helped by a heavy spend on promotions in June. "This is a really disappointing statement. It is their fourth consecutive decline in UK like-for-like sales," Andrew Kasoulis, at Credit Suisse First Boston, said. However, another said the share-price reaction had been overdone. "They weren't great numbers but they have been harshly treated in share-price terms. It shows that we are in a bear market where people look for the bad news. And if they find some then they slam-dunk the shares."
Sainsbury's shares now yield more than 5 per cent. "That's more than a gilt, which I find extraordinary," one analyst said. "They are also trading at no more than net asset value on a portfolio of property which hasn't been revalued for years."
Other supermarket groups have also seen a slowdown. Tesco has seen underlying growth fall to 4.5 per cent while Safeway recently reported a figure of 3 per cent.
Sainsbury's pointed out that if had given no negative guidance on profit forecasts. Analysts are still expecting profits of £700m this year.
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