Sainsbury’s Q3 results greeted with relief by City analysts

Shore Capital’s Clive Black and Darren Shirley said they were “pleased and relieved”​ to see Sainsbury continue to post positive like-for-like sales (excluding fuel) – albeit just so.

Like-for-like sales rose by 0.2%, after stripping out the effect of new stores and excluding fuel. Total sales were up by 2.5%, or by 2.7% excluding fuel.

Against a backdrop of low expectations for Christmas sales – partly blighted by the pre-Christmas storms – the retailer confirmed 28M customer transactions in the seven days before Christmas.

Low expectations​

King said trading in the first two months of the quarter had been particularly slow. “This quarter has been characterised by a very tough sales environment throughout October and November, with customers saving up in order to treat their families over the Christmas period. ​

“However, we saw strong sales in the key period over Christmas, helping record numbers of customers to ‘live well for less’. Like-for-like sales excluding fuel of 0.2%, coupled with a strong contribution from new space, led to our best Christmas ever.”​

Black and Shirley noted British Retail Consortium-Nielsen Shop Price Index recorded food inflation in November of 1.7% – down from 2.3% in October. So, Sainsbury, and the other big four supermarket chains, were likely to be losing market share and suffering negative volumes. This was “unchartered territory for the industry, as hard discounters, premium retailers and specialists win”.​

‘Hard discounters’​

They also noted “a very strong” ​recent trading performance announced today (January 8) from Waitrose and the John Lewis Partnership, with like-for-like sales in the five weeks to Christmas Eve up by 3.1%. Online sales were 33.4% ahead.

Shore Capital expected Sainsbury to deliver current pre-tax profit of between £795–800M range, leading to a current year earnings per share of between 32.8 and 33p.

The analyst repeated its ‘buy’ advice on Sainsbury stock.

Joseph Robinson, lead consultant at Conlumino, hailed the retailer’s “remarkable run of LFL ​[like-for-like] sales growth that has continued for the 36th consecutive quarter”.​

Sainsbury continued to outperform its main peers, thanks to balanced investments, which were helping it to respond effectively to increasingly polarised tastes, he added.

But such small like-for-like growth reflected a market where even the top-perfoming players were e having to “sprint just to standstill amid growing threats at both ends of the value spectrum”.​

Joseph Robinson, lead consultant at Conlumino, hailed the retailer’s “remarkable run of LFL ​[like-for-like] sales growth that has continued for the 36th consecutive quarter”.​

Outperform its main peers​

Sainsbury continued to outperform its main peers, thanks to balanced investments, which were helping it to respond effectively to increasingly polarised tastes, he added.

But such small like-for-like growth reflected a market where even the top-perfoming players were e having to “sprint just to standstill amid growing threats at both ends of the value spectrum”.​

The retailer’s success was based on its ability to command appeal at both ends of the market; balancing quality with affordability.

“Its main weapon here has been own label investment,”​ said Robinson. “At the value end, its Basics sub-brand is perceived by shoppers as representing quality at competitive prices at a time when price, and more importantly value, are vital attributes.”​

Meanwhile, King has pledged his commitment to remain at the helm of Sainsbury for at least the short to medium term. “I’ve said that I’m closer to the end of my time than the start. But I still have plenty of legs left in me yet,”​ he told the BBC Radio 4’s Today​ programme, after 10 years in charge of the retailer.

Sainsbury sales​

Within the Sainsbury trading data we highlight a few points of detail:

• Premium own-label Taste the Difference sales rose by 10%.

• Convenience sales rose by 18%.

• Online sales momentum slowed but still rose by 10%.