The summer sun and World Cup football fever have helped J Sainsbury, the rejuvenated supermarket retailer, into a sixth quarter of consecutive growth, with underlying sales up 5.7 per cent over the past 12 weeks.
Britain’s third-largest supermarket retailer, which is midway through a three-year turnaround plan, beat the City’s forecasts with its first quarter sales improvement, which sees total sales for the period up by 8.1 per cent.
Justin King, the chief executive, highlighted the tougher comparable figures Sainsbury’s is generating for itself and said the market remains highly competitive.
However, he said he believed the retailer could still meet its “Making Sainsbury’s Great Again” target of generating sales growth of £2.5 billion by March 2009.
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Meeting this and other targets would give Mr King up to £5 million in bonuses under the retailer’s long-term incentive scheme.
“A combination of warm weather and additional sales of products related to the World Cup, where Sainsbury’s is official supermarket of the England football team, has led to a particularly good trading performance during the past couple of weeks after the sector generally experienced a slower level of growth after Easter,” Mr King said.
“Going forward we are up against tougher comparatives and the market continues to be very competitive although we continue to believe our underlying sales performance can achieve the goal outlined in our Making Sainsbury’s Great Again plan,” he said.
Sainsbury’s healthy performance puts it on track to post annual pre-tax profits of about £345 million, with the retailer’s boss doing nothing this morning to suggest it would do otherwise.
But with the supermarket group sounding a cautious note on growth and competition for the second time this year, analysts at Seymour Pierce argued that shares in Wm Morrison, a rival, might be a better buy.
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Richard Ratner, the broker’s head of equities, said: “Sainsbury’s continues to drive sales but the bottom line is, in our view, unlikely to grow as fast as some are expecting. Recovery, if it actually gets there, is almost fully discounted in the share price. Morrison is a better bet.”
Mr King said the retailer, which is bracing itself for a Competition Commission probe into supermarkets’ dominance of the market, now has a presence in more than 80 per cent of the UK.
As well as refurbishing 29, stores, 14 supermarkets and 15 convenience stores during the quarter, Sainsbury’s also opened four new outlets.
Shares in Sainsbury’s lost 1p to 322p in early deals. The stock market values Sainsbury’s at more than £5.5 billion.
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