Sainsbury's reveals first quarterly sales growth in more than two years
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- 15 Mar 2020
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Sainsbury’s has revealed its first quarterly sales growth in more than two years, boosting hopes that the supermarket will make a new bid for Argos owner Home Retail Group later this week.
The supermarket said sales at established stores rose 0.1% in the nine weeks to 12 March .
A 14% rise in online grocery sales, 10% rise in sales of clothing and 11% lift in sales of entertainment products, such as CDs and DVDs, lifted by the release of singer Adele’s latest album and the Spectre Bond film, all helped improve trade. Ideas that cater to new food trends, such as ready prepared “courgetti” - spaghetti made from courgettes - and “boodles” - noodles made from butternut squash also helped attract new shoppers.
The company said underlying sales at its large supermarkets was flat to slightly down, with the vast majority of growth coming from online.
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The performance was a step up from the 0.4% fall in sales Sainsbury’s delivered in the 15 weeks to 9 January, and ahead of analysts’ forecasts. The City had expected Sainsbury’s to reveal further sales declines.
Mike Coupe, chief executive, said Sainsbury’s had delivered a “strong performance” over the quarter as it had both increased the number of transactions at its tills and increased the average number of items shoppers put in their baskets. He said better service and availability as well as a move away from promotions to regularly available lower prices had all helped drive sales.
“We have traded well this year and are making excellent progress implementing our strategy. The market will remain competitive but we are confident that we will continue to outperform our major peers,” he said.
With a reference to a comment from Asda boss Andy Clarke who saw sales fall further after suggesting performance had bottomed out, Coupe said he wasn’t going to suggest Sainsbury’s had passed a “nadir”.
“There are still some headwinds in the industry, not least the continuation of the deflationary cycle ... but we have some level of confidence given the rounded nature of our performance,” Coupe said.
Coupe would not comment on whether Sainsbury’s planned to raise its offer for Home Retail but the stronger-than-expected sales will be a boost to the supermarket’s bid hopes.
He said Sainsbury’s strong performance showed that his strategy laid out in November 2014 was working and the chain was outperforming its peers such as Asda, Morrisons and Tesco.
“Argos represents an opportunity to accelerate that [strategy] but it is by no means a must do deal. There’s a price and we won’t go beyond that. We’ll maintain a level of financial discipline ... There is no reason why Sainsbury’s won’t be a successful company in future without the Argos transaction taking place,” he said.
Sainsbury’s cash and shares deal, agreed with Home Retail last month, is up against a rival all cash offer from South African retail group Steinhoff International, the owner of Bensons Beds and Harveys in the UK.
Both companies have a deadline of 18 March to agree a formal offer, and Sainsbury’s is widely expected to raise its bid to £1.5bn or 185p a share from around 170p a share at present.
Any rise in Sainsbury’s share price automatically boosts the value of a potential bid, so Coupe is likely to have been disappointed that Sainsbury’s shares slipped nearly 1% in morning trading to 278p despite its better-than-expected sales performance.
Steinhoff has proposed a 175p a share offer, and is currently examining Home Retail’s books with a view to making a formal bid.
