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Sainsbury warns of "competitive" market

20/06/2007

Supermarket chain J Sainsbury has warned that the retail market remains "competitive" after reporting a lower-than-expected growth in sales.

Analysts are taking the news as a further sign of a slowdown within the sector after Sainsbury's larger rival Tesco said yesterday that it was facing a "tougher" year amid UK sales which also fell short of market expectations.

In a trading update Sainsbury revealed that its first quarter sales were up 5.1 per cent excluding petrol, but the performance failed to impress market commentators, who had been expecting a rise of around 5.4 per cent.

"It does look like things are starting to slow down," Seymour Pierce analyst Andrew Wade told the Reuters news agency.

Commenting on the results, Sainsbury chief executive Justin King said: "The operating environment remains competitive, which has been reflected in recent activity across the market."

However, he insisted that the supermarket group had made a "strong start" to the third year of its recovery plan, Making Sainsbury's Great Again.

Sainsbury, which said it had reduced prices on a further 4,500 products since April, stressed that it had enjoyed a tenth quarter of continuous growth in the 12 weeks to June 16th – despite tough comparatives as a result of last year's football World Cup and the very warm weather experienced in June 2006.

The retailer said its ability to control stock levels over the quarter had improved as a result of changes to its supply chain systems and store operations and explained that sales growth had been driven by food sales, with organic and fair trade products performing well.

"Our sales and operational performance this quarter represents continued progress towards our Making Sainsbury's Great Again targets," said Mr King.


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