Sainsbury's cuts its sales forecast

Sainsbury's Image copyright PA

Sainsbury's has cut its full-year sales forecast after warning that customers are likely to "spend cautiously" in the first few months of 2014.

The supermarket giant had expected to see a sales rise of 1% to 1.5% in this financial year.

But despite seeing record transactions in the run-up to Christmas, it now expects growth of "just under 1%".

Although Sainsbury's reported a 36th consecutive quarter of like-for-like sales growth, its shares fell 2%.

In the 14 weeks to 4 January, the firm's like-for-like sales, stripping out the effect of new stores, rose 0.2% excluding fuel.

Sainsbury's said the seven days before Christmas were the firm's "busiest ever" trading week, with more than 28 million transactions.

It described the third-quarter figures as a "good sales performance in a tough market".

Rival chains Waitrose and the Co-op also reported rises in sales over the Christmas period.

'Tough and challenging'

Late last year, Sainsbury's overtook Asda and moved into the number two spot for the largest supermarket in the UK, second to Tesco.

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Media captionSainsbury's Justin King: "We have beaten our competition and [had] a small amount of growth"

Chief executive Justin King told the BBC that trading conditions had been "tough and challenging" and there had been an expectation that the firm's sales might have fallen.

However, while October and November had been difficult, the performance over Christmas had resulted in "a small amount of growth for the quarter, taken as a whole".

"We've beaten our competition," he added.

Sainsbury's also reported healthy growth in sales of its own-brand Taste the Difference range, which saw a rise in sales of more than 10%.

Other successful sectors included Sainsbury's convenience stores, which grew nearly 18%, and online shopping, which notched up more than 10% growth.

BBC business editor Robert Peston described the sales growth of 0.2% as "a bump in the road after an extraordinary 35 quarters of unbroken growth", but "not one such that [Mr] King is likely to feel desperately uncomfortable".

Joseph Robinson, lead consultant at retail analysts Conlumino, said that Sainsbury's "continues to outperform its main peers".

However, he said the low growth was "reflective of a market where even the outperforming mainstream players are having to sprint just to standstill, amid growing threats at both ends of the value spectrum".

Late rush

At the same time, rival Waitrose reported strong sales in the run-up to Christmas.

On a like-for-like measure, sales for the five-week period to Christmas Eve rose 3.1% compared with 2012.

Waitrose said it was a record Christmas period, with a 4.1% rise in sales for the 12 days ending 31 December.

Like other retailers, Waitrose has reported a huge increase in online sales, which were up by more than a third compared with 2012.

Waitrose managing director, Mark Price, said: "Every year retailers say that Christmas is late, but with some justification in 2013, as customers phased their shopping in line with the mid-week fall of the main festivities."

Image copyright PA
Image caption Discount supermarkets are increasing their market share

The BBC's Steph McGovern said "squeezed-middle" Sainsbury's was seeing its market under pressure both from high-end Waitrose and from discounters Aldi and Lidl.

She said Aldi and Lidl were the "clear winners" of the Christmas period: "They've done brilliantly with double-digit growth."

On Tuesday, the two German-owned firms both said they had seen their best Christmas in the UK to date, although they did not release sales figures.

The Co-op also reported rising sales in its food business over the festive season, "driven by the success of the strategy to strengthen its core convenience offer".

In the 13 weeks to 4 January, its like-for-like sales grew by 1% compared with the same period a year earlier. However, total food sales were flat over the whole quarter as the Co-op disposed of some larger stores.

So far, Debenhams has been the big disappointment in the Christmas trading updates from UK retailers. It warned of a sharp drop in profits due to heavy discounting.

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