Safeway's sales growth lags rivals

The recovery story at Safeway looked threatened yesterday after the supermarket chain unveiled slowing full-year underlying sales and an increase in final-quarter sales that lagged its larger rivals.

Britain's fourth-biggest supermarket chain said that like-for-like sales had grown by 4.9 per cent in the year to end March against 5.2 per cent a year earlier. Underlying sales in the fourth quarter rose by 4.1 per cent in line with the previous quarter. This included a 0.6 per cent contribution from Easter falling early.

Paul Smiddy, an analyst at Credit Lyonnais Securities, said: "It was a poor quarter. The Safeway brand should be punching a little higher." Shares in the group, which peaked at 418.75p last year, slipped 4p to 301p.

Safeway's fourth-quarter performance trailed that reported last week by Tesco, the market leader, and J Sainsbury, the number two.

Sainsbury said underlying sales in the final quarter had risen by 5.3 per cent, excluding petrol and the impact of an early Easter, while Tesco reported final-quarter growth of 5.2 per cent although this included the peak Christmas trading period.

Safeway described the sales growth as "satisfactory" given the delays to its store refurbishment programme. Four hypermarkets due to have been opened in the quarter were delayed to May or June while the group digested lessons learnt from the opening of its first mega-store format last December in Plymstock.

"We took a double whammy in March," a spokesman said. "Four big stores were undergoing severe disruption plus several other stores were going through their refit programme."