Sainsbury’s has turned the tide in the fourth quarter, following a worse-than-expected festive performance when like-for-like sales fell 0.4 per cent.
The company has achieved its first positive same-store sales quarter (excluding fuel) in more than two years.
While premature to call this anaemic increase a full recovery, this does mark positive momentum, and taking a longer-term view, Sainsbury’s balance of quality and price appears to be delivering results. Given the hyper-competitiveness of the UK grocery sector, this is a positive story and is a far outperformance of Asda and Tesco, and on par with Morrisons. With grocery deflation fluttering above 2 per cent, a 0.1 per cent uptick in volumes shows that Sainsbury’s is clearly winning back footfall.
Sainsbury’s has made strides in investing in its 3000 own-label products, with healthier eating innovations such as butternut squash noodles hitting the right note with New Year diet kicks. Furthermore, its move away from multi-buy promotions towards a more simplified Every Day Low Pricing strategy is backed by a trading strategy geared towards regularly low prices.
It is leading in convenience too, flexing its fascia for location and occasion, opening 16 convenience stores during the quarter including a micro store (circa 750 sqft) in Richmond. Wider progress in positioning helped deliver like-for-like transaction growth in its supermarkets and its online grocery offer saw sales growth of nearly 14 per cent.
Sainsbury’s achieved more than 10 per cent growth in clothing, helped by the launch of its 22nd Gok Wan collection. An impressive 11 per cent growth in entertainment sales was boosted by big releases and Sainsbury’s Bank performed well, with 15 per cent volume growth in insurance new business.
Sainsbury’s is going in the right direction in core groceries and is further ahead in its recovery than its Big Four rivals. However, it should be cautious, as the rest of the Big Four seek to better align their propositions to the market and the discounters continue to open more stores.
With this in mind, its non-food presence, which will be significantly boosted if its acquisition of general merchandiser Argos is successful, has vital role to play in delivering wider growth.
- George Scott is senior analyst at Verdict Retail.