Cheaper food slows Sainsbury's sales growth

Image caption,
Sainsbury's sales growth in the period mirrors that at Tesco.

Sainsbury's has seen its smallest rise in quarterly sales for five years, due to low food price inflation and higher fuel costs limiting consumer spending.

Like-for-like sales at Sainsbury's - which pulls out new store openings - grew by 1.1% in the 12 weeks to 12 June, excluding petrol.

But when the return of VAT to 17.5% after its temporary cut was factored in, growth was just 0.3%.

Sainsbury's added that total sales grew by 4.4% excluding fuel.

The update comes a day after Tesco said its latest quarterly like-for-like UK sales had also increased by 1.1%, though when the VAT change was taken into account, it grew only 0.1%.

Tesco had said its sales growth was also limited by lower food price inflation, and high petrol and diesel prices meaning customers had less money to spend on other things.

'Budget strain'

Sainsbury's chief executive Justin King told the BBC that the government spending cuts due to be announced in next week's Budget would further limit consumer spending this year.

"It is going to be flat across the market, and that is the key reason why," he said.

"Customers' budgets are going to be under strain."

Mr King added that while it was "early days yet", the World Cup had started to give it a sales boost.

Specifically, he said Sainsbury's had been selling lots of vuvuzelas, the plastic horns that are popular with South African football supporters.

He said Sainsbury's had already sold 50,000 of its order of 70,000.

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