Sainsbury faces ‘tough times’: City analyst

By Anne Bruce

- Last updated on GMT

Sainsbury could be squeezed as Morrisons and Tesco started their own-label range reviews, warned Shore Capital
Sainsbury could be squeezed as Morrisons and Tesco started their own-label range reviews, warned Shore Capital

Related tags: Sainsbury, Tesco

Analysts warned tough times were ahead for Sainsbury as competitors Tesco and Morrisons beef up, after the supermarket posted it first quarter trading statement today (June 13).

Sainsbury reported total sales for first quarter up by 3.6% (3.8% excluding fuel). Like-for-like sales for first quarter were up by 1.4% for the 12 weeks to June 9, including the Diamond Jubilee weekend.

However, Clive Black from city analyst Shore Capital told that while Sainsbury had been “toughing it out well”​ it was now facing a “far from ideal”​ situation.

It was three-quarters through a three-year programme to re-launch its own-label products under the ‘by Sainsbury’ banner and had reaped many of the rewards of that project.

Own-label range reviews

But Morrisons and Tesco were just at the start of similar own-label range reviews and were both enjoying a resurgence.

Black commented: “It will be an interesting dynamic. Sainsbury's relaunched its private label in a more favourable climate. Its competitors are now getting better. Sainsbury's will just have to hold the line and continue to tough it out now, it can't do another relaunch.”

Sainsbury continues to outperform the market with store sales about 3% ahead of its key competitor Tesco UK, in the period, he said.

But Black warned: “Sainsbury’s differential over Tesco may be starting to narrow and it is noteworthy that this statement included the Queen’s Diamond Jubilee, whereas Tesco’s did not, albeit Sainsbury states that it had ‘strong sales in the lead up to the Jubilee celebrations’.

“Good sales growth”

Sainsbury's chief executive Justin King said: "We have delivered good sales growth in the quarter, in line with our expectations ...

"Our own-label ranges are leading the way in helping customers to Live Well for Less, with the relaunch of by Sainsbury now 75% complete. Over 70% of these products are completely new or redeveloped.”

Convenience stores continued to be a strong driver for growth, he said, achieving year-on-year sales growth of 16%.

Sainsbury added 5,853m2​ of gross space to its estate over the quarter through the opening of 21 convenience stores and one extension. It also refurbished eight stores over the quarter.

King said: "Looking forward, we expect the market to remain competitive. Universal appeal, supported by market leading own-label ranges, Brand Match and loyalty insight, ensures we help our customers to Live Well for Less. We remain well placed to continue to outperform the market."

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