'X Factor effect' boosts profits, says Sainsbury's boss
Wednesday 10 November 2010
The chief executive of Sainsbury's today said the supermarket had benefited from the "X Factor effect" as customers saved money by staying in to watch their favourite TV shows.
Justin King said the retailer's Taste the Difference range had seen a sharp growth in sales since its relaunch in September, which he believed reflected a trend of consumers improving home dining rather than going out to restaurants.
The premium offering was given a £1 billion makeover earlier this year, with two-thirds of the 1,100 product range changed or improved.
Mr King said: "People are staying in rather than going out to eat. People are watching the X Factor and other TV shows but they're eating well while they're doing it."
The autumn television season boasts some of terrestrial television's most-watched shows, including The X Factor on ITV and BBC's Strictly Come Dancing.
Gemma Lovelock, retail analyst at TLC Marketing Worldwide, said the results reflected "an entrenched stay-at-home culture" over the past two to three years.
She said: "People are not just eating more at home they are also drinking more at home and the supermarkets generally are benefiting from this behavioural shift."
She added: "Instead of spending money on big-ticket items on the high street, consumers are spending more on premium food products in the supermarkets, and indulging in good food at home rather than eating out."
Mr King's comments came as Sainsbury's posted an 8% rise in half-year profits to £332 million and boasted record customer numbers.
The supermarket sector is proving increasingly competitive as cash-strapped consumers resist price hikes caused by commodity price inflation.
But Sainsbury's is one of the strongest players in the market and figures yesterday revealed it was the only one of the "big four" supermarkets to grow market share in the three months to October 31.
Mr King said customer numbers were now at an all-time high of more than 20 million transactions every week, which was up one million on last year.
Sainsbury's said it had "worked hard" to keep prices lower in the face of rising food costs, but had seen the same customers buying from both its basics and premium ranges.
The supermarket has been on an aggressive expansion drive to boost its customer base and remains on track to open 1.5 million square feet in new space during the current financial year.
In the last six months, the chain has opened or extended 29 stores, adding 540,000 square feet to its estate.
The company is also growing its convenience store business - which delivers annual sales of £1 billion - and has seen strong growth of 20% in online sales.
Mr King said its space growth momentum placed the supermarket in a good position to perform well in a challenging economic environment.
Total sales including VAT and fuel were up 7% to £11.9 billion. Sainsbury's said excluding fuel, sales grew 2% on a like-for-like basis.
Sainsbury's added that its drive for non-food business - identified as a key area for the supermarket - was still paying off and continued to grow at three times the rate of food.
It also announced the launch of a music and film digital download service in time for Christmas. It will be the first time a supermarket website will offer a full selection of films for purchase or download.
Neil Saunders, consulting director of research analyst Verdict, said many of the supermarket's initiatives, including space expansion, were beginning to bear fruit.
He said: "Sainsbury's is driving future growth through a number of initiatives. This balanced approach will help it maintain performance even as market conditions become tougher."
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