J Sainsbury sales dip on low food price inflation and high fuel costs

Third largest UK supermarket chain J Sainsbury (LON:SBRY) has posted its smallest rise in quarterly sales for five years it has announced today, dragged down by low food price inflation and higher fuel costs.

Kate Neilson
shareprices.com - Wednesday, June 16, 2010

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Sainbury's sales growth has dipped in the last quarter

Like-for-like sales excluding petrol sales dropped to 1.1 per cent and 4.6 per cent including the petrol arm of the business in the 12 weeks to 12 June. The 1.1 per cent like-for-like sales figure matches that of one of the group’s main competitors Tesco (LON:TSCO) with the grocers both suffering from a lack of food price inflation.

Tesco previously said its sales growth was limited by low food price inflation and high petrol and diesel prices leaving customers with less money to spend in store. And it appears the same two issues have hit Sainbury’s too.

Justin King, Sainbury’s Chief Executive, said: “We’ve delivered another good performance ahead of the market on top of strong growth last year.

“Continued fuel price inflation has driven further growth with total sales including fuel up 7.6 per cent.

“Our focus on operational excellence has been key to our success in a challenging consumer environment.”

King also added in an interview with the BBC that the government spending cuts that are set to be announced next week will further limit consumer spending in 2010. He said: “It is going to be flat across the market, and that [the Budget] is the key reason why.

“Consumer budgets are going to be under strain.”

However, King and Sainsbury’s will be lifted by a strong sales boost from its World Cup range.

The retailer bought stock of vuvuzela horns – the horns being blown by football fans at the World Cup that have come under criticism from players, football associations and TV viewers – after the Confederations Cup last year in South Africa with many predicting the buzzing noise to be the soundtrack of the 2010 World Cup.

Sainbury’s has managed to sell 40,000 England-branded vuvuzelas already and aims to shift another 75,000 during the competition with one being sold for £2 every two seconds on Saturday – the day of England’s first game in the competition.

Sainbury’s share price hasn’t suffered too much on the FTSE 100 today with the share price up 0.7 per cent after gaining as much as 1.3 per cent earlier in the session.

Shares are very much in line with Tesco’s and Morrison’s (LON:MRW) which are currently 0.5 per cent up.

The retail food and drug retailer sector as a whole is up 0.46 per cent just before midday.

 

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