Sainsbury's celebrates record Christmas as grocers shine

Supermarket's chief executive warns of tougher 2010 to come

Sainsbury's enjoyed a record Christmas that beat City expectations, driven in part by a surge in customer traffic and booming non-food sales.

The UK's third-biggest grocer also revealed yesterday a surge in sales of champagne and the traditional Christmas dinner, as customers shrugged off the downturn to treat themselves.

The uplift in sales reaffirmed industry data this week that the big supermarkets have enjoyed a strong Christmas, helped by an increase in the level of promotions in the sector to about 35 per cent, although Sainsbury's said its participation in this activity was the lowest of its big rivals.

Justin King, the chief executive of Sainsbury's, said: "If 2008 was probably the most price-driven Christmas we have experienced in many years, 2009 definitely saw a swing back to quality. We have shown we can grow in both circumstances."

Mr King added: "Traditional values are returning and I don't think they will be a last hurrah – I think they are quite persistent. The sense is that customers were fed up with being fed up with the bad news in the run-up to Christmas and putting a turkey – as opposed to a turkey crown – on the table is quite a traditional thing to do."

Sainsbury's said it sold 500,000 fresh turkeys over the period and a trebling in the sales of its own-brand Blanc de Noirs Champagne highlighted the trend towards a traditional Christmas.

For the 13 weeks to 2 January, Sainsbury's delivered underlying sales growth of 3.7 per cent, excluding fuel and including VAT, which was marginally down on the 4.6 per cent posted in the second quarter. The City had forecast a rise of 3.5 per cent.

Clive Black, an analyst at Shore Capital, said: "This is a commendable performance from Sainsbury's to our minds." The grocer attributed the third-quarter slowdown in growth to declining food price inflation, but pointed to buoyant festive trading last year and that its underlying sales were up 8.2 per cent over the past two years.

"It was a strong Christmas on a strong Christmas," said Mr King. Falling food price inflation has also recently taken the shine off the underlying sales of rival supermarkets, although Waitrose has powered ahead since launching its Essentials value range in March.

According to Nielsen, Waitrose delivered sales growth of 13.6 per cent in the 12 weeks to 26 December 2009, ahead of Morrisons' 10.1 per cent, Asda's 6.1 per cent, Sainsbury's 5.9 per cent, Tesco's 5.3 per cent and Marks & Spencer's 3.7 per cent.

Sainsbury's said it had attracted an average one million additional customers during the quarter that peaked at a record 24 million in the week to the end of Christmas Eve. In the third quarter, the 828-store grocer's total sales jumped by 6.2 per cent.

Scores of its new customers signed up to Sainsbury's Nectar loyalty card scheme, where membership has risen by 750,000 to a total of 16 million over the past year. Similarly to Tesco's hefty investment into ClubCard in 2009, Sainsbury's invested heavily in Nectar before Christmas, including the distribution of vouchers dispensed at the check-out and an advertising campaign encouraging customers to redeem their reward points.

Mr King said: "The roll-out of our 'coupon at till' scheme was a clear winner with customers, who have responded to the targeted offers and rewards."

The 828-store grocer also hailed the performance of its non-food division.

Mr King said: "Non-food has been the real star performer of the quarter, growing at four times the rate of food." Sainsbury's cited a boost from marketing-led events on toys, entertainment products and Hallowe'en, which it said had been "fabulous", as well as "good growth" on clothing and Christmas ranges. In non-food, it said it had benefited from the exit from the market of general merchandise retailers, such as Woolworths.

But Mr King warned that many of the constraints on consumer spending predicted for 2009 were likely to become reality this year, and that the next government will have to raise taxes and reduce spending to cut the deficit. "The reality of what faces consumers will be very tough," he said.