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Sainsbury’s Q2 sales rise above expectations


Leading UK supermarket Sainsbury’s saw like-for-like (LFL) sales rise by 1.9 per cent in its second quarter of trading, according to a statement published this morning.

The sales increase excluding fuel is ahead of retail analyst estimates and has been driven by a strong performance by the company’s non-food lines and rapid expansion in the UK.

Convenience is another burgeoning area of the business, with 24 new stores of this type opening in the 16 weeks to October 1st 2011 to help push total sales up 4.4 per cent for the quarter.

While growing its convenience offering has been a feature of Sainsbury’s business development in the last three months – there are now more than 400 c-stores across the UK – clothing is set to be a key focus area for the retailer as 2011 draws to an end.

Tomorrow celebrity fashion expert Gok Wan launches his debut womenswear collection in over 200 Sainsbury’s stores, following the company’s unveiling of its revamped Tu clothing range in the spring.

CEO Justin King said that today’s figures represented “a good sales performance in a tough consumer environment”, but indicated there is a significant difference between food and general merchandise trading – a trend reflected in recently published British Retail Consortium data.

“Our general merchandise and clothing businesses continued to grow strongly in the quarter, with sales growth well ahead of the grocery business,” he explained.

And highlighting the retailer’s ambitious growth strategy, he added: “We opened four new supermarkets and completed 12 extensions, adding 390,000 sq ft of gross new space in the quarter and creating over 1,500 new jobs.

“We continued our strategy of bringing the Sainsbury’s brand into new markets, and opened our most northerly supermarket, in Nairn, Scotland, on the same day as a new supermarket 600 miles away in Dawlish, Devon.”

Sainsbury’s sales upturn beat the expectations of Shore Capital Stockbrokers, which had predicted growth of 0.5 per cent LFL. Stripping out the impact of VAT, the investment group predicts this represents “resilient” growth of one per cent.

A note prepared by Shorecap retail analysts Clive Black and Darren Shirley said: “We believe the drivers for sales growth remain in line with Q1, with non-food outperforming food growth by a ratio of c2.5:1.

“The group remains on track to deliver seven to eight per cent space growth for the year whilst it has reiterated its target of annual margin expansion of c10-20 basis points, though at the lower end of the range for the current year.

“We currently forecast current pre-tax profits for 2012 of £665 million, earnings per share of 25.4p, which is a little below consensus of £702 million and 27.4p respectively.”

Published on Wednesday 05 October by Editorial Assistant

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