RETAIL ROUNDUP: Sainsbury's Growth Highlights Subdued Spending

   By Kathy Gordon 

LONDON--J Sainsbury PLC (SBRY.LN) reported subdued third-quarter sales growth Wednesday, underscoring how even the best-performing UK supermarkets are struggling against declining volumes and new shopping habits.

The company said same-store sales rose 0.9% excluding Value Added Tax and fuel in the 14 weeks to Jan. 5, a slowdown from 1.9% growth in the second quarter. Wm Morrisons Supermarkets PLC (MRW.LN) Monday reported a sales drop of 2.5% and Tesco PLC (TSCO.LN) is expected to report sales growth of around 1% Thursday.

Tellingly though, Tesco is comparing 2012 sales to last year's profit warning-inducing 2.7% decline, whereas Sainsbury's was up against a 2.1% rise last year.

Sainsbury Chief Executive Justin King said sales were boosted by its extensive online operations and 500 convenience stores, the two fastest-growing channels in the grocery sector, the lack of which has proved to be Morrisons' undoing.

Still, Sainsbury's growth rate was the slowest since 2005 and Mr. King blamed shoppers trading into its cheaper own-brand ranges, reflecting hard-pressed customers' propensity to seek out value in unbranded products or discount retailers which were the clear Christmas winners.

Figures from Kantar published Tuesday showed German discounters Aldi and Lidl gaining market share and growing at 30% and 10% respectively in the 12 weeks to Dec. 25.

The picture emerging from the key Christmas period as more retailers report festive sales is muted. December sales from the British Retail Consortium showed a 0.3% rise in like-for-like sales, and the market is evenly split amongst the winners, like Next PLC (Retail sales up 3.9%) and Debenhams PLC DEB.LN (five week sales up 5%), and losers like Morrisons and music retailer HMV Group PLC (HMV.LN) which is forecast to report retail sales down 8% next week, according to Seymour Pierce.

The overwhelming consensus from retail chief executives is that the forthcoming year will be a similarly low-growth picture. Constrained shoppers remain under pressure from rising inflation and are searching out bargains and saving up for special occasions, which will make the already competitive landscape even more cut-throat, putting sales and profits under increasing pressure.

Still to Report:

Jan 10: Marks & Spencer Group PLC; Tesco PLC

Jan 15: Ocado Group PLC

Jan 17: Home Retail Group PLC; AB Foods PLC; Dixons PLC

Jan 24: Carphone Warehouse Group PLC

Feb 7: Supergroup PLC

Write to Kathy Gordon at [e-mail]

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