Even booming vuvuzela sales can't help Sainsbury's slowing sales growth.
After Tesco (LSE: TSCO) provided a quarterly trading update yesterday, today it's the turn of J Sainsbury (LSE: SBRY)
In a quarterly trading statement covering the 12 weeks to 12 June, the UK's third-largest supermarket reported total sales (including VAT) up 7.6%, falling to 4.4% excluding fuel.
Like-for-like sales (retailers' preferred measure of growth) rose 4.6%, but only 1.1% excluding fuel. In fairness, this is better than the 0.1% ex-fuel growth reported by Tesco yesterday, and also ahead of the retail market as a whole.
In the fiercely fought world of online grocery, Sainsbury reported sales growth just short of 20%, plus a record 120,000 weekly orders -- news which may make Ocado's owners nervous.
Growth in non-food sales is strong, with the retailer reporting its best-ever week for clothing sales. Likewise, Sainsbury's DVD sales are growing steeply and its World Cup range is flying off the shelves, especially those annoying wasp-buzzing vuvuzelas.
Sainsbury's loyalty scheme, Nectar, is now the UK's leading reward programme, with 17 million cardholders, and has been boosted by an increase of 800,000 in regular Sainsbury's users.
As I write, Sainsbury's shares are up 0.5% at 326p, slightly ahead of the wider market.
What next?
Justin King, Sainsbury's CEO, said:
"We have made a good start to the financial year in line with our expectations. While we continue to expect the consumer environment to remain challenging, our universal customer appeal, unique loyalty offer and accelerated growth strategy mean we are well placed to make continued good progress."
Sainsbury and its bitter rival Tesco both face the same immediate problems: fuel price inflation leaves shoppers with less to spend on other goods, and food price inflation is dropping steeply. Hence, underlying sales growth at Sainsbury is the lowest it's been for five years.
Similarly, expectations of tax hikes, public-spending cuts and higher unemployment have made some consumers wary of opening their wallets or purses. However, Tesco has the edge over Sainsbury when it comes to growth, thanks to its faster-growing international operations (which account for almost half of its 4,811 stores worldwide).
For the record, here are both retailers' basic fundamentals:
| Item | Sainsbury | Tesco |
|---|
| Share price (p) | 326 | 397 |
| Market cap (£bn) | 6.0 | 31.6 |
| Price-earnings ratio | 13.9 | 13.2 |
| Dividend yield (%) | 4.3 | 3.1 |
Sainsbury's shareholders can look forward to a further update at its annual general meeting on Wednesday, 14 July.
More from Cliff D'Arcy:
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