Food price inflation to stabilise, Sainsbury sales up

By Mike Stones

- Last updated on GMT

Related tags: Food price inflation, Austrian school, Marketing, Sainsbury

Sainsbury reported total sales up by 3.9% – partly reflecting the contribution of new store space.
Sainsbury reported total sales up by 3.9% – partly reflecting the contribution of new store space.
Food price inflation is expected to stabilise over the next few months – despite recent reports of big food price increases from Waitrose – according to market research organisation BRC-Nielsen.

The BRC-Nielsen monthly Shop Price Index (SPI) was unchanged month-on-month in December 2012 at 1.5%. Food prices eased by 0.5% to 4.1%, with non-food prices flat, up from minus 0.3% in the year to November.

The researchers identified two main drivers of food price inflation. First, was an easing of some global commodity costs that outweighed the upward trend in domestic crop prices in December.

Second, was an easing of global prices for maize, wheat and soyabeans.

Fresh food inflation was 4.2% – down from 4.6% in November, while ambient food inflation was 3.9% – down from 4.5% in November.

‘Incomes remain under pressure’

Shore Capital analysts Darren Shirley and Clive Black said: “We expect it ​[food price inflation] to remain in the system at reasonably full levels, so inhibiting industry volumes as real incomes remain under pressure and helping to sustain high promotional participation by the trade.”

Meanwhile, Sainsbury has reported a small rise in sales over the festive period, claiming that the number of shoppers in its stores had reached a record high.

Its like-for-like sales – apart from fuel ‒ rose by 0.9% in the 14 weeks to January 5, compared with sales 12 months ago.

Total sales were 3.9% higher – partly reflecting the contribution of new store space.

Sainsbury ceo Justin King

Sainsbury ceo Justin King said the retailer had delivered “another quarter of good sales in a challenging retail environment”.

Earlier this week, research organisation Kantar Worldpanel reported that the retailer was the only one of the ‘big four’ UK supermarket groups to boost its market share before Christmas.

Also this week, Morrisons confirmed a 0.5% fall in sales in the six weeks to December 6, prompting Shore Capital to claim the retailer had “lost touch with its core customers​”.

Commenting on Sainsbury’s performance, Shirley and Black said: “We deem this to be a satisfactory performance in demonstrably dull market conditions. We note that the BRC-KPMG reported food like-for-like sales in the UK during the period from October to December were just 0.3% ahead and the shop price index suggested that food inflation eased in December by 0.5% to 4.1%.”

While Sainsbury was trading against tough relative comparatives of 2.1% like-for-like sales, Shirely and Black added: “The trading momentum recorded by Sainsbury does represent a modest deceleration on the 1.9% ex-fuel like-for-like sales recorded in the Paralympic Games.”

But they added that Sainsbury: “has been really alive to its core customers’ needs and wants”​. The retailer had retained “commendable loyalty at a time when economic conditions were not, arguably, in its favour compared with what may be considered more value orientated peers”.

Shore Capital retained its ‘hold’ advice on Sainsbury stock.

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