Sainsbury sales growth driven by inflation

Underlying sales at J Sainsbury rose 3.4 per cent in the first quarter of its financial year, but the group warned that most of the increase was due to inflation rather than volume growth.

The figure compared with Tesco’s 3.5 per cent increase and Wm Morrison’s 7 per cent rise over slightly different periods.

Justin King, chief executive, said food price inflation in Sainsbury shops was slightly more than 3 per cent in the quarter, up from about 2 per cent in the previous quarter, but below official government statistics.

Darren Shapland, finance director, said most of the 3.4 per cent like-for-like increase came from food price inflation, with “volumes just above flat”. Fuel sales benefited from higher prices and from extra volumes as motorists shopped around for cheaper petrol and came to Sainsbury.

Mr King said he was pleased with the performance in the quarter, which was in line with the group’s expectations. The quarter compared with a strong period last year, when like-for-like sales were up 5.1 per cent, although the group adjusted the number to take account of the changed timing of the Easter weekend.

But he discounted the idea that consumers were “trading down” to the hard discounters such as Aldi, arguing that evidence from market research and Sainsbury’s own performance showed shoppers were cutting down on restaurant meals rather than groceries.

Jonathan Pritchard of Oriel Securities described the statement as “bland” and “short on detail”. While he was not cutting his forecast for the year of pre-tax profits of £555m, up from £479m, he said the lack of volume growth in the industry could lead supermarkets to be even more active on price promotions, which could hit estimates later.

Mr King said non-food sales were continuing to “grow strongly” as ranges were expanded, while online sales were up more than 40 per cent.

Improvements to the supply chain in recent years meant product availability in shops had risen further.

Total sales rose 8.1 per cent in the 12 weeks to June 14, boosted by the sharp increase in petrol prices. Excluding fuel, the increase was 4.5 per cent.

Like-for-like sales, excluding new store openings, rose 7.3 per cent including fuel sales. The shares fell 10½p to 325½p.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.