October 2, 2013 12:26 pm

Convenience stores boost Sainsbury sales

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An acceleration in its convenience store business helped J Sainsbury increase sales in its second quarter.

Sales from stores open at least a year rose 2 per cent, year on year, excluding fuel, in the 16 weeks to September 28. This included a 0.3 per cent contribution from store extensions.

Justin King, chief executive, said sales from convenience stores rose 20 per cent year on year in the quarter, an acceleration from the 15 per cent in the preceding three months.

In contrast, online sales growth slowed from 20 per cent to 15 per cent.

Mr King attributed the change to the warmer summer weather, which encouraged consumers to do more top-up shopping of fresh foods, but to be less inclined to wait in for online deliveries.

“It shows you what you can do when your business format is aligned with changes in consumer shopping behaviour,” he said of the increase in convenience sales.

He said Sainsbury opened 31 convenience stores in the quarter, making a total of 50 such openings in the first half.

Sainsbury could pass the 1,000 convenience store mark – roughly double its current estate – in 2016, he said.

Mr King said that while economic indicators appeared more positive, customers were not yet feeling more confident.

“There are lots of good economic indicators,” he said. “There is no doubt that customers when they open their newspapers or watch the television, they are seeing a better newsflow. There maybe an improvement in sentiment. You can only describe that sentiment as being less bad, rather than being back to the highs of optimism.”

He added that “today the reality of household budgets is they are under further pressure”, and even if conditions did improve, consumers would continue to manage their incomes in the way they have done in the past five to six years.

“Christmas will be about price. Customers’ budgets will remain under pressure,” he said. However, customers would save up for special occasions, including Christmas, he added.

The second quarter was helped by the summer heatwave, Mr King said, but Sainsbury’s trading compared with a period a year ago that included the Paralympic Games, which it sponsored.

Sainsbury said sales of its own-brand products expanded at twice the rate of other brands, while its non-food sales grew at more than twice the rate of food.

Sainsbury shares fell 5p to 385.20p in late morning trading.

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