Sainsbury sales rise delights

13 April 2012

HAS Sainsbury turned the corner? That is the question on analysts' lips today after the company delighted the City with a 7.2% lift in fourth-quarter sales.

The improvement counters a tide of negative news elsewhere in the retail sector and marks a significant advance for chief executive Justin King, who took over the helm at the company last year.

Like-for-like sales were up 3.7% in the quarter, according to a trading update released to the City ahead of the group's annual results.

Sainsbury said the rise in fourth-quarter sales was part of an upward trend and reflected a combined strategy of reducing prices on some 6,000 items. The company has also increased product ranges and is tackling supply chain problems that led to empty shelves in some key stores last year.

It has taken on 3,000 extra store staff to help improve customer service and reorganised its central office administrative departments with the loss of some 600 back-office workers.

King hailed the figures, which he said marked a continued recovery from Sainsbury's recent difficulties, despite the difficult retail climate. 'Of particular note were Valentine's Day and Mother's Day which were well executed in stores and helped drive sales over those periods,' he said.

'In the last four weeks we have had a strong contribution from Comic Relief selling over 4m red noses. We estimate Comic Relief delivered an extra 0.3% like-for-like sales in the quarter.'

POLL: Have Sainsbury's stores improved in the last year?

He added that the company had donated £6.5m to Comic Relief as a result of the sales.

King acknowledged that the climate for retailers remained 'competitive' but insisted; 'We are confident that by continuing to do a better job for our customers every day we will reach our objective of market levels of sales growth by the end of 2005-2006.'

Sainsbury is targeting an extra £2.5bn of sales by 2007-2008. But while the retail business has started to get back on track, the company's financial services arm has experienced a hiccup. King admitted that Sainsbury's Bank, which markets a range of financial services products such as loans and cards in conjunction with leading partners, is finding the going tough.

'We indicated [in January] that Sainsbury's Bank had experienced a difficult quarter in an increasingly competitive market. This has continued into the fourth quarter. We are pleased with our progress during the quarter. However we are still only six months into implementing the plans we outlined last October. We recognise that there is a long way to go and must continue to be realistic about the task in hand.'

The group unveiled a £90m share incentive scheme for 1,100 of its top employees, from boardroom to store manager level. If targets are met, including sales growth of £2.5bn, King could be awarded as much as £5m in four years' time. He will also be buying shares worth half his £657,000 salary for the scheme.

Chairman Sir Philip Hampton said the incentive scheme was intended to introduce 'an ownership culture' for the top team and to reward growth in sales and profits. It will run over four years and the maximum awards will be paid out if sales grow by £2.5bn and earnings by 21%.

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