Sainsbury's out-trades Tesco on UK food sales

Retail giants' results set to show a marked difference in performance

James Thompson
Saturday 09 June 2012 14:13 BST

The diverging performance of Britain's two biggest food retailers will again be laid bare this week, when Sainsbury's posts underlying sales ahead of Tesco in the UK.

Market-leader Tesco is set to deliver a fall of 1.7 per cent in UK like-for-like sales in its first quarter to 26 May, which will reinforce the pressure on chief executive Philip Clarke. In contrast, Sainsbury's trading period covers the entire Jubilee bank holiday, so its chief executive Justin King will be quizzed on the country's patriotic spending splurge.

While Sainsbury's will provide a host of data about sales of party food, champagne and miles of bunting, economists will also scrutinise Mr King's comments for signs that any feelgood impact from the celebrations could boost moribund consumer confidence.

City analysts have pencilled in a 1.6 per cent rise in underlying sales for Sainsbury's for the 12 weeks to 9 June, although this will mark a slowdown on the 2.6 per cent growth in the grocer's fourth quarter.

While Sainsbury's outperformed listed rivals Tesco and Morrisons over recent months, Asda – the UK's second biggest grocer including non-food – delivered a 2.2 per cent rise in sales in its most recent quarter.

For Tesco, which operates in 14 countries, the expected fall in first-quarter trading on home soil, follows a drop in UK sales of 1.6 per cent in its fourth quarter and a sustained period of under-performance. Mr Clarke, who took the helm in March 2011, also unveiled the grocer's first profit warning in 20 years in January. Its share price has not yet recovered.

He is expected to point to progress in his £1bn investment plan to turn around the spluttering performance of its domestic business. In addition to a positive impact from hiring 8,000 extra store staff, Mr Clarke is likely to highlight an improvement in the performance on its Everyday Value range, which replaced its Value range in the spring.

Clive Black, the analyst at Shore Capital, said: "This first quarter statement is important if only to reveal that Philip Clarke's plan to revitalise an underperforming Tesco UK is making progress and delivering stability."

Tesco, which had profits of £3.9bn last year, is expected to deliver a strong rise in total sales, boosted by its rapid store opening programme overseas.

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