Sainsbury hails recovery

13 April 2012

RESTRUCTURING supermarkets group J Sainsbury cheered the City this morning with news of fresh improvement in first-quarter sales.

The company, which is fighting back to stem several years of waning fortunes against Tesco and Asda, said today that like-for-like sales on a same-store basis were 1.9% ahead during the first three months of the year, 1.3% up if sales of petrol are excluded.

The improvement is slightly ahead of City expectations where analysts are eagerly awaiting signs of a pick-up following the appointment last year of chief executive Justin King. Sainsbury described the figures as encouraging and King said the improvement reflected hard work in product availability and price position.

The work comes a year after supply and logistics problems at the group left some stores short of key products and prompting some disaffected shoppers to go off to Tesco. This was now in the past, King believed, and he said he believed customers were reacting positively to the changes they now see in their local stores.

King said: 'We are encouraged by our trading performance in the first quarter of this financial year which shows sustained underlying sales growth. Given the more difficult and competitive grocery retail market over the past three months, like-for-like sales of 1.3% represents continued progress. We are also pleased that independent industry measures now show our market share is growing.'

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King acknowledged that price competition continued apace though prices were coming down at a lower level than they did in the last quarter of last year: 'Supermarket deflation has continued, albeit at a lower level than we saw in the fourth quarter of last year. We have now been investing in lowering our prices for just over a year. At the same time we have enhanced product quality and significantly improved availability as we strengthen the Sainsbury's brand.'

Sainsbury pointed to its recent advertising campaign as a contributor to the company's success. The company's use of 'Naked Chef' Jamie Oliver has been seen in the advertising industry as one of the few successful uses of celebrity endorsement.

According to a new survey out this week from media giant WPP, one in eight adverts in the UK now features a celebrity but their use in advertising has fallen markedly over the past five years. This, according to WPP, is a cyclical move and the proliferation of competing advertising messages forces advertisers to find ways of holding their potential customers' attention.

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