Christmas quarter sales cheer Sainsbury’s - UK
IOL Business - Jan 12th 2015, 10:29
British grocer Sainsbury’s reported a better-than-expected Christmas quarter, boosting its shares and providing a rare bright spot in an industry convulsed by the march of the discounters.
The firm, which trails troubled market leader Tesco and Walmart Stores’ Asda by sales, said it remained cautious about prospects for its full financial year with food price deflation and intense competition likely to continue.
It said sales excluding fuel at stores open more than a year fell 1.7 percent in the 14 weeks to January 3, its fiscal third quarter, an improvement after a second-quarter drop of 2.8 percent.
Analysts had forecast a 2.5 percent to 4.4 percent sales fall in the third quarter.
Analysts welcomed the performance but noted Sainsbury’s remained vulnerable to a fight back by Tesco under new boss Dave Lewis, and from discounters Aldi and Lidl which have won market share by offering products at a low price with fewer ranges.
Share price picks
Shares in the 145-year-old company, down 36 percent during the last year, rose 4 percent while Tesco and fourth-placed player Morrisons rose 3 percent.
“Sainsbury’s numbers were better than expected but I am not a buyer of the stock for now, as top line guidance remains unchanged,” said Securequity sales trader Jawaid Afsar.
Sainsbury’s had outperformed rivals for years, thanks to a strategy focused on own-brand products and the quality of its food, while expanding its convenience and online businesses. However, it too has been hurt by the rise of the German discounters, which looks set to spark a prolonged price war.
“Given the uncertainty in the trading environment, food price deflation and the price reductions we announced this week, we currently expect our fourth-quarter like-for-like to be similar to that of our first half (down 2.1 percent),” it said.
Sainsbury’s said in November it would cut costs, dividends and planned to open new stores to spend another £150 million (R2.6 billion) on lowering prices. This week, it lowered prices on more than 700 products, including its meat, fish, and poultry categories.
Asda said it was investing £300m in the first quarter of 2015 to cut prices on essential items and branded products.From © Independent On-line 2013. All rights reserved.
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